INTERCOMPANY PROFIT-INVENTORIES

1. X Company purchased 70% ownership of B Company on January 1, 2010, at underlying book value. While each
company has its own sales force and independent product lines, there are substantial inter-corporate sales inventory
each period. The following inter-corporate sales occurred during 2011 and 2012:

Cost of Sales Unsold at Year Sold

Year Seller Product sold Buyer Price End of Year to Outsider
2011 X Co. P 224,000 B Co. P 320,000 P 70,000 2012
2012 B Co. P 156,000 X Co. P 240,000 P 38,500 2013
2012 X Co. P 175,000 B Co. P 218,750 P 31,500 2013

The following data summarized the result of their financial operations for the year ended, December 31, 2012:
X Company B Company

Sales P 1,925,000 P 840,000

Gross Profit 952,000 252,000
Operating Expense 385,000 140,000
Ending Inventory 168,000 140,000
Dividend Received from Affiliate 63,000 -
Dividend Received from Non-affiliate - 35,000

For the year ended 2012, compute:

I. Consolidated sales and consolidated cost of goods sold
a. P 2,306,250; P 1,228,775 c. P 2,306,250; P 1,103,475
b. P 2,306,250; P 1,101,025 d. P 2,765,000; P 1,101,025

II. Consolidated net income attributable to parent’s shareholders equity and non-controlling interest in net income
a. P 650,667.50 c. P 738,167.50; P 29,557.50
b. P 738,167.50 d. P 675,167.50; P 40,057.50

2. On January 1, 2011, Polly Company acquired 90% of the outstanding common shares of Sari Company for a price
of P 280,000. On that date, the stockholders’ equity of Sari Company was P 200,000. All of the assets and liabilities
of Sari Company had book values approximately equalled to their fair market values except land that was overvalued
by P 8,000, plant assets(with remaining life of 9 years) were undervalued by P 108,000. The net excess was due to
Goodwill. For 2012, there were intercompany sales. Information relating to sales, inventories and profit percentage
were as follows:
Polly Co. Sari Co.
Intercompany Sales P 180,000 P 84,000
Intercompany Inventories
December 31, 2011 60,000 36,000
December 31, 2012 14,400 12,000
Gross Profit percentage based on cost 100% 33-1/3%
Net Income P 100,000 P 72,000

Consolidated net income attributable to parent’s shareholders equity; non-controlling interest on net income
a. P 180,520; P 8,280 c. P 176,260; P 8,280
b. P 180,520; P 7,140 d. P 176,260; P 7,140