On January 2, 2021, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value. During 2021 and 2022, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power Company consistently recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on sales. The inventories of the buying affiliate, which all came from inter-company transactions show: December 31, 2021 December 31, 2022 Power P240,000 P160,000 Solar 100,000 40,000 On October 1, 2021, Solar Inc. purchased a piece of land costing P1,000,000 from Power Company for P1,500,000. On December 1, 2022, Solar Inc. sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2022, Solar Inc. sold a used photo-copier with a carrying value of P60,000 and remaining life of 3 years to Power Company for P42,000. Separate Statement of Comprehensive Income for the two companies for the year 2022 follow: Power Company Solar Inc. Sales P25,000,000 P14,000,000 Cost of sales (15,000,000) (8,400,000) Gross Profit P10,000,000 P5,600,000 Operating expenses (6,000,000) (3,800,000) Operating Profit P4,000,000 P1,800,000 Loss on Sale of Office Equipment (18,000) Dividend Revenue 40,000 Net Income P4,000,000 P1,822,000 For the year 2022, compute for Consolidated gross profit
On January 2, 2021, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value.
During 2021 and 2022, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power
Company consistently recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on
sales. The inventories of the buying affiliate, which all came from inter-company transactions show:
December 31, 2021 December 31, 2022
Power P240,000 P160,000
Solar 100,000 40,000
On October 1, 2021, Solar Inc. purchased a piece of land costing P1,000,000 from Power Company for
P1,500,000. On December 1, 2022, Solar Inc. sold this land to unrelated party for P1,500,000. On the other
hand, on July 1, 2022, Solar Inc. sold a used photo-copier with a carrying value of P60,000 and remaining
life of 3 years to Power Company for P42,000.
Separate Statement of Comprehensive Income for the two companies for the year 2022 follow:
Power Company Solar Inc.
Sales P25,000,000 P14,000,000
Cost of sales (15,000,000) (8,400,000)
Gross Profit P10,000,000 P5,600,000
Operating expenses (6,000,000) (3,800,000)
Operating Profit P4,000,000 P1,800,000
Loss on Sale of Office Equipment (18,000)
Dividend Revenue 40,000
Net Income P4,000,000 P1,822,000
For the year 2022, compute for
Consolidated gross profit
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