INTERCOMPANY SALE OF INVENTORY

1. Roland Corp., acquired a 80% interest in Camila Co. in 2019. For the year ended December 31, 2019
and 2020. Camila Co. reported an income of P160,000 and P180,000 respectively. During 2019,
Camila sold merchandise to Roland Corp. for P20,000 at a profit of P4,000. The merchandise was later
resold by Roland Corp. to outsiders for P30,000 during 2020. For consolidated purposes, what is the
minority interest’s share of Camila’s net income for 2019 and 2020 respectively?

2. Parker Corp. owns 80% of Smith, Inc.'s common stock. During 2023, Parker sold Smith
P250,000 of inventory on the same terms as sales made to third parties. Smith sold all of the
inventory purchased from Parker in 2023. The following information pertains to Smith and
Parker's sales for 2023.

PARKER SMITH
Sales 1,000,000 700,000
Cost of Sales 400,000 350,000
600,000 350,000

What amount should Parker report as cost of sales in its 2023 consolidated income
statement?

3. On January 2, 2022, Christian Co. acquired a 70% interest in Dior Corp. In 2023 Dior Corp. reported
net income of P800,000; and in 2024, P900,000. In 2023, an upstream sale of merchandise between
the affiliated companies occurred for P100,000 at a gross margin of 20%. In 2024, the merchandise
was resold to outsiders for P150,000. What is the amount of the minority interest net income in 2023?

4. Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 2022, at underlying book
value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value
of Scrooge Corporation. Pilfer purchased inventory from Scrooge for P90,000 on August 20, 2023, and
resold 70 percent of the inventory to unaffiliated companies on December 1, 2023, for P100,000.
Scrooge produced the inventory sold to Pilfer for P67,000. The companies had no other transactions
during 2023.What amount of consolidated net income will be assigned to the controlling interest for
2023?

5. Bruce Company owns 80% of Lee Corp.’s common stock. During October 2023, Lee sold merchandise
remained to Bruce for P100,000. At December 31,2023, one-half of the merchandise remained in
Bruce inventory. For 2023, gross profit percentages were 30% for Bruce and 40% for Lee. The amount
of unrealized intercompany profit in ending inventory at December 31,2023 that should be eliminated
in consolidation is:

NOS. 6 to 8 are based on the following information:

On January 1, 2022, Entity A acquires 60% of outstanding ordinary shares of Entity B

at a gain on bargain purchase of P40,000. For the year ended December 31, 2023,
Entity A and Entity B reported sales revenue of P2,000,000 and P1,000,000 in their
respective separate income statements. At the same year, Entity A and Entity B
reported cost of sales of P1,200,000 and P700,000 in their respective separate
income statements.
 During 2022, Entity A sold inventory to Entity B at a selling price of P280,000 with
gross profit rate of 40% based on cost. On the other hand, Entity B sold inventory to
Entity A at a selling price of P400,000 with gross profit rate of 30% based on sales
during 2023.

On December 31, 2022, ¼ of the goods coming from Entity A remained in Entity B's
inventory but all were eventually sold to third persons during 2023. As of December
31, 2023, 2/5 of the goods coming from Entity B were eventually sold to third persons.

For the year ended December 31, 2023, Entity A reported net income of P500,000
while Entity B reported net income of P200,000 and distributed dividends of P50,000.
Entity A accounted for its inventory in Entity B using cost method in its separate
financial statements.

6. What is the consolidated sales revenue for the year ended December 31, 2023?

7. What is the consolidated gross profit for the year ended December 31, 2023?

8. What is the noncontrolling interest in net income for the year ended December 31, 2023?
INTERCOMPANY SALE OF LAND AND PPE

1. PeopleMag sells a plot of land for $100,000 to Seven Star Company, its 100 percent owned
subsidiary, on January 1, 2008. The cost of the land was $75,000, when it was purchased in
2007. In 2010, Seven Star sells the land to Hot Properties Inc., an unrelated entity, for
$120,000. How is the land reported in the consolidated financial statements for 2008, 2009
and 2010?

2. On January 1,2022, Pro Company acquired 70% of Sol, Inc., at book value. On December
31,2023, Sol sold computer to Pro for P90,000. Sold acquired the computer at a cost of
P60,000. Pro will use a 10-year life, no salvage value, and straight-line depreciation. For 2023,
Sol reported CI of P100,000. What is the NCI in CI of Subsidiary?

3. Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1,
2007. On January 1, 2008, Mortar received $350,000 from Granite for a equipment Mortar had
purchased on January 1, 2005, for $400,000. The equipment is expected to have a 10-year useful life
and no salvage value. Both companies depreciate equipment on a straight-line basis.

4. Baywatch Industries has owned 80 percent of Tupperware Corporation for many years. On January
1, 2021, Baywatch paid Tupperware P270,000 to acquire equipment that Tupperware had
purchased on January 1, 2018, for P300,000. The equipment is expected to have no scrap value and
is depreciated over a 15-year useful life. Baywatch reported operating earnings of P100,000 for 2023
and paid dividends of P40,000. Tupperware reported net income of P40,000 and paid dividends of
P20,000 in 2023.Compute the amount reported as consolidated net income for 2023.

5. On January 1, 2023, Ramon Corporation acquired 75 percent of Tester Company's voting common
stock for P300,000. At the time of the combination, Tester reported common stock outstanding of
P200,000 and retained earnings of P150,000, and the fair value of the noncontrolling interest was
P100,000. The book value of Tester's net assets approximated market value except for patents that
had a market value of P50,000 more than their book value. The patents had a remaining economic
life of ten years at the date of the business combination. Tester reported net income of P40,000 and
paid dividends of P10,000 during 2023.What balance will Ramon report as its investment in Tester at
December 31, 2023, assuming Ramon uses the equity method in accounting for its investment?