Pure Corporation acquired an 80% interest in Sincere Company on January 2, 20x6 for P2, 520,000. On this date, the share capital and retained earnings of the two companies follow: Pure Co Sincere Co Share Capital Retained Earnings 6,000,000 3,000,000 2,250,000 450,000 On January 2, 20x6, the assets and liabilities of Sincere Co were stated at their fair values except for machinery which is P225,000 lower than its fair value (remaining life is 3 years). On September 30, 20x6, Sincere sold merchandise to Pure at an inter-company profit of P150, 000; 25% was still unsold at year- end. Likewise, on October 1, 20x7, Sincere purchased merchandise from Pure for P3, 600,000. The selling affiliate included a 20% mark-up on cost on this date. Only 75% of these purchases had been sold to unrelated parties as of December 31, 20x7. As of December 31, 20x7, goodwill was determined to be impaired by P60, 000. The following is the summary of the 20x7 transactions of the affiliated companies: Pure Co Sincere Co

Pure Corporation acquired an 80% interest in Sincere Company on January 2, 20x6 for P2, 520,000. On this date, the share capital and retained earnings of the two companies follow: Pure Co Sincere Co Share Capital Retained Earnings 6,000,000 3,000,000 2,250,000 450,000 On January 2, 20x6, the assets and liabilities of Sincere Co were stated at their fair values except for machinery which is P225,000 lower than its fair value (remaining life is 3 years). On September 30, 20x6, Sincere sold merchandise to Pure at an inter-company profit of P150, 000; 25% was still unsold at year- end. Likewise, on October 1, 20x7, Sincere purchased merchandise from Pure for P3, 600,000. The selling affiliate included a 20% mark-up on cost on this date. Only 75% of these purchases had been sold to unrelated parties as of December 31, 20x7. As of December 31, 20x7, goodwill was determined to be impaired by P60, 000. The following is the summary of the 20x7 transactions of the affiliated companies: Pure Co Sincere Co

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 35P

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