QUIZ-INTERCOMPANY

On January 2, 2012, Plain Company acquired 90% of the outstanding shares of Sheet Inc. at book value. During 2012
and 2013, intercompany sales amounted to P2,000,000 and P4,000,000
respectively. Plain Company consistently recognized a 25% mark-up based on cost while Sheet Inc. had a 25% gross
profit on sales. The inventories of the buying affiliate, which all came from intercompany transactions show:
December 31, 2012 December 31, 2013
Plain P240,000 P160,000
Sheet 100,000 40,000

On October 1, 2012, Sheet Inc., purchased a piece of land costing P1,000,000 from Plain Company for P1,500,000. On
December 1, 2013, Sheet Inc., sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2013,
Sheet Inc., sold a used photo-copier with a carrying value of P60,000 and remaining life of 3 years to Plain Company for
P42,000.

Separate Statement of Comprehensive Income for the two companies for the year 2013 follow:
Plain Company Sheet Inc
Sales 25,000,000.00 14,000,000.00
Cost of Sales (15,000,000.00) (8,400,000.00)
Gross Profit 10,000,000.00 5,600,000.00
Operating Expenses (6,000,000.00) (3,800,000.00)
Operating Profit 4,000,000.00 1,800,000.00
Loss on Sale of Office Equipment (18,000.00)
Dividend Revenue 40,000.00
Net Income 40,000,000.00 1,822,000.00

Required: Compute the following amounts for/as of December 31, 2013

1. Consolidated Gross Profit
A. P19,632,000 B. P15,712,000 C. P15,632,000 D. P15,584,000

2. Consolidated Net Income attributable to Parent

A. P6, 183,300 B. P6,369,000 C. P6,169,800 D. P6,191,300

3. Non-controlling interest in Net Income

A. P189,700 B. P185,700 C. P128,200 D. P1.84,200

4. Consolidated Operating Expense

A. P9,800,000 B. P9,788,000 C. P9,803,000 D. P9,789,500

5. Anthony Corp holds 70 percent ownership of Jeremiah Enterprises. On January 1, 2009 Jeremiah Enterprises
Paid Anthony Corp P400,000 for a truck that Anthony Corp had purchased for P450,000 on January 1, 2005. The
truck has a 15-year total economic life and no residual value. Both companies use straight line depreciation.

Give the eliminating entry in the consolidating workpaper prepared as of December 31, 2009, to remove the
effects of the intercompany sale.
a. Gain on sale 70,000 c. Gain on sale 70,000
Truck 70,000 Truck 50,000
b. Investment in Sub. 63,636 Accum. Depreciation 113,636
Truck 50,000 Depreciation 6,364
Accum. Depreciation 107,272 d. Gain on sale 70,000
Depreciation 6,364 Truck 70,000
PC Corp. owns 70 percent pf SO Co.’s common stock acquired January 1, 2004. Total amortization of excess from the
investment is at a rate of P20,000 per year. SO regularly sells merchandise to PC at 150 percent of SO’s cost. PC’s
December 31, 2004 and 2005 inventories include goods purchased intercompany of P112,500 and P33,000, respectively.
The separate incomes (*do not include investment income) of PC and SO for 2005 are summarized as follows:
PC SO
Sales P 1,200,000 P 800,000
Cost of sales (600,000) (500,000)
Other expenses (400,000) (100,000)
Separate income P 200,000 P P200,000
6. Total consolidated income should be allocated to Retained Earnings and minority interest income in the amounts of:
a. P344,550 and P61,950, respectively c. P406,500 and P61,950, respectively
b. P358,550 and P60,000, respectively d. P338,550 and P67,950, respectively

Gaerlan Corp. is an 80% owned by Fil-Em, Inc on January 1, 2004, Gaerlan paid P100,000 for a truck with an expected
economic life of 10 years and no anticipated residual value. Gaerlan sold the truck to Fil-Em, Inc., on January 1, 2010.
During preparation of the consolidation workpaper for 2010, the following workpaper entry was made to eliminate the
effects of the intercompany truck sale:
Truck 48,000
Gain on sale of truck 12,000
Depreciation Expense 3,000
Accumulated Depreciation 57,000

6. What amount did Fil-Em, Inc. pay Gaerlan for the truck?
a. 58,000 b. 52,000 c. 48,000 d. 57,000
7. What amount will be reported for (1) trucks and (2) accumulated depreciation in the December 31, 2010, consolidated
balance sheet?
a. 100,000 and 40,000 c. 100,000 and 60,000
b. 52,000 and 13,000 d. 100,000 and 70,00
8. What amount of depreciation was recorded by Fil-Em during 2010?
a. 13,000 c. 10,000
b. 12,000 d. 3,000
9. If Gaerlan reports net income of P50,000 in 2010, what amount of income will be assigned to the non-controlling
interest in the 2010 consolidated income statement?
a. P 8,200 c. 10,000
b. P 7,600 d. 10,600
10. If Gaerlan reports net income of P60,000 in 2011, what amount of income will be assigned to the non-controlling
interest in the 2011 consolidated income statement?
a. 10,200 c. 12,600
b. 12,000 d. 10,000

11. Cesar Company holds 90% of the common stock of Diane Company During 2014, Cesar reported sales of P 1,120,000
and cost of goods sold of P 840,000. For this same period, Diane has a sales of P 420,000 and cost of goods sold of P
252,000. Also during 2014, Cesar sold merchandise to Diane for P 140,000. The subsidiary still possesses 40% of this
inventory at the end of 2014 Assuming that the transfers were from Diane Co. to Cesar Co., what is consolidated
sales ?
a. 1,400,000 b. 1,450,000 c. 1,500,000 d. 1,540,000

12. Elizabeth Company acquired 100% of Louie Inc. on January 5, 2014. During 2014, Elizabeth sold Louie for P2,400,000
goods that cost P1,800,000. Louie still owned 40% of the goods at the end of the year. Cost of goods sold was
P10,800,000 for Elizabeth and P6,400,000 for Louie. What was consolidated cost of goods sold?
a. 17,200,000 b.16,960,000 c. 14,800,000 d. 15,040,000