Consolidation - Intercompany sale of inventory

On January 1, 2021, XYZ Co. acquired 80% interest in ABC Inc.

Information on January 1, 2021 (acquisition date):

 ABC net identifiable assets have a carrying amount of P74,000 and fair value of P90,000. The
difference is due to the following:

Fair
Carrying Amount Fair Value adjustment (FVA)
Value
Inventory 20,000 24,000 4,000
Equipment,
40,000 52,000 12,000
net
60,000 76,000 16,000

 The remaining useful life of the equipment is 6 years.

 XYZ measured the NCI at proportionate share

Information on December 31, 2021 (consolidation date)

Statement of Financial position

As at December 31, 2021

XYZ Co. ABC Inc.

ASSETS

Cash 41,000 67,750

Account Receivable 75,000 22,000
Inventory 97,000 10,400
Investment in subsidiary (at
75,000
cost)
Equipment, net 140,000 30,000
TOTAL ASSETS 428,000130,150
LIABILITIES AND EQUITY
Accounts Payable 73,000 30,000
 XYZ Co. ABC Inc.
Total Liabilities 73,000 30,000
Share capital 170,000 40,000
Share premium 65,000 10,000
Retained Earnings 120,000 50,150
Total Equity 355,000100,150
TOTAL LIABILITIES AND EQUITY 428,000130,150

Statement of profit or loss

For the year ended December 31, 2021

XYZ Co. ABC Inc.

Sales 330,000 150,750
Cost of goods sold (185,000)(96,600)
Gross profit 145,000 54,150
Depreciation Expense (40,000) (10,000)
Distribution Costs (35,000) (18,000)
Profit of the year 70,000 26,150

The following intercompany transactions occurred 2021:

a. XYZ Co. sold goods costing P12,000 to ABC, Inc. for cash, at a markup of 40% on selling price. ABC held
one-fourth of the goods at year end.

b. XYZ Co. acquired inventory from ABC, Inc. for P12,000 cash. ABC, Inc. uses a normal markup of 25%
above its cost. XYZ's ending inventory included P4,000 from this purchase.

Requirement: Prepare the December 31, 2021 consolidated financial statements.