Question

On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at...

On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain on bargain purchase of P40,000. For the year ended December 31, 2020, 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 goods sold of P1,200,000 and P700,000, respectively.

During 2019, 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 2020.

On December 31, 2019, 25% of the goods coming from Entity A remained in Entity B's inventory but all were eventually sold to third persons during 2020. As of December 31, 2020, 40% of the goods coming from Entity B were eventually sold to third persons.

For the year ended December 31, 2020, 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 investment in Entity B using cost method in its separate financial statements.

Question: What is the consolidated sales revenue for the year ended December 31, 2020?

Question: What is the consolidated gross profit for the year ended December 31, 2020?

Question: What is the non controlling interest in net income for the year ended December 31, 2020?

Question: What is the consolidated net income atttibutable to parent's shareholders for the year ended December 31, 2020?

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Answer #1
Inter company sales
Downstream
2019
SP 280000
GP on cost 40%
Cost 200000
Profit 80000
% in Ending inventory 2019 25%
Unrealised profit 2019 20000
Upstream
2020
SP 400000
GP on cost 30%
Profit 120000
% in ending inventory in 2020 60%
Unrealised profit 2020 72000
Adjusting entries
Sales 240000
To COGS 168000
To inventory 72000
Retained earnings 20000
To COGS 20000
Entity A Entity B Adjustments Consolidated
Dr Cr
Sales 2000000 1000000 240000 2760000
COGS 1200000 700000 188000 1712000
Gross Profit 800000 300000 1048000
Other expense 300000 100000 400000
Net income 500000 200000 648000
Non-controlling interest [40%] 51200 =(200000-72000)*0.4
Net income attributable income to controlling interest 596800
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