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CHAPTER 17 – INTERCOMPANY SALES OF PPEPROBLEM 17-1On January 1, 2017, Texas Company purchased 75 percent of the outstanding voting shares of UtahCompany at book value.On January 1, 2017, Texas Company sold equipment to Utah Company at a gain of P40,000.Thisequipment has an estimated useful life of five years from date of sale.On July 1, 2017, Texas Companypurchased land from Utah Company for P60,000 that had a book value of P50,000.Statements of CI forthe two companies for year 2017 are as follows:TexasUtahSalesCost of salesGross marginExpensesOperating income before taxGain on sale of equipmentGain on sale of landDividend incomeCI before income taxP 1,000,000400,000600,000200,000400,00040,00010,000P450,000P 500,000250,000250,000100,000150,00010,000________P 160,000Required:Prepare a consolidated statement of comprehensive income for the year ended December31, 2017.
PROBLEM 17-2Vincent Company holds 80 percent of the stock of Jupiter Company, acquired on January 1, 2013, forP160,000.On the date of acquisition, Jupiter Company reported retained earnings of P50,000 and hadP100,000 of common stock outstanding.Vincent uses the cost method in accounting for its investmentin Jupiter Company.
CHAPTER 17 – INTERCOMPANY SALES OF PPETrial balance data for the two companies on December 31, 2017 are as follows:Vincent CompanyJupiter CompanyItemDebitCreditDebitCreditCash and cash equivalentsAccounts ReceivableInventoryLandProperty, plant and equipmentInvestment in Jupiter CompanyCost of goods soldDepreciation and amortizationOther expensesDividends declaredAccumulated depreciationAccounts payableBonds payableCommon stockRetained earningsSalesGain on sale of equipmentDividend incomeTotalP100,00013,000260,00080,000500,000160,000140,00025,00015,00030,000_________P 1,323,000P205,00060,000200,000300,000294,000240,00020,0004,000P 1,323,000P20,00015,00090,00080,000150,00060,00015,0005,0005,000________P 440,000P45,00020,00050,000100,000105,000120,000________P 440,000Additional information:1.At the date of combination, the book values and fair values of all separably identifiable assets ofJupiter were the same.2.On January 1, 2016, Jupiter sold land costing P8,000 to Vincent Company for P18,000.3.On January 1, 2017, Vincent Company sold to Jupiter equipment that it had purchased forP75,000 on January 1, 2012.The equipment has a total economic life of 15 years and was soldto Jupiter for P70,000.Both companies use straight-line depreciation.4.There was P7,000 of intercompany receivables and payables on December 31, 2017.Required:a.Give all eliminating entries needed to prepare a consolidation workpaper for 2017.b.Prepare a three-part workpaper for 2017, in good form.c.Prepare a consolidated statement of financial position, income statement, and retainedearnings statement for 2017.a.Working Paper Elimination Entries – Dec. 31, 2017(1)Dividend income4,000NCI1,000Dividends declared – Jupiter (4,000/80%)5,000To eliminate intercompany dividends(2)Common stock – Jupiter100,000Retained earnings – Jupiter50,000Investment in Jupiter Company120,000NCI30,000To eliminate equity accounts of Jupiter as of the date of acquisition(3)Goodwill40,000Investment in Jupiter Company40,000To allocate excess to goodwill
CHAPTER 17 – INTERCOMPANY SALES OF PPE(4)Retained earnings, Jan. 18,000NCI2,000Land10,000To eliminate unrealized gain on sale of land – Upstream.

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Term
Spring
Professor
Ms. Rea Martesano
Tags
Balance Sheet, NCI, Generally Accepted Accounting Principles, Subsidiary

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