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Intercompany Profit and Inventory Analysis

The document discusses intercompany sales and inventories between two companies, X and B, for years 2011 and 2012. It provides sales, cost, and inventory figures for intercompany transactions between the two companies those years. It also provides financial data for each company for 2012 and calculates consolidated sales, cost of goods sold, net income, and amounts attributable to parent and non-controlling interests.

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Mark Joseph Olino
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67 views1 page

Intercompany Profit and Inventory Analysis

The document discusses intercompany sales and inventories between two companies, X and B, for years 2011 and 2012. It provides sales, cost, and inventory figures for intercompany transactions between the two companies those years. It also provides financial data for each company for 2012 and calculates consolidated sales, cost of goods sold, net income, and amounts attributable to parent and non-controlling interests.

Uploaded by

Mark Joseph Olino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

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

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