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2223-06, BC - INTERCOMPANY TRANSACTIONS PROBLEMS

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Louis Philippe N. Simbulan
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124 views2 pages

2223-06, BC - INTERCOMPANY TRANSACTIONS PROBLEMS

Uploaded by

Louis Philippe N. Simbulan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AFAR REVIEW NOTES BUSINESS COMBINATION – INTERCOMPANY TRANSACTIONS

PROBLEM A
On this topic, continue to assume the information from Review materials 2023-04 but with the additional information:

1. There were no intercompany sales of inventory prior to 2022, information resulting from intercompany sales,
ending inventory and gross profit rates are summarized below:

Year Seller Buyer Amount Intercompany Merchandise Intercompany Profit


in 12/31 Inventory (based on Selling Price)
2022 Parent Subsidiary P 150,000 60% of sales 20%
2022 Subsidiary Parent 60,000 50% of sales 40%
2023 Parent Subsidiary 120,000 80% of sales 25%
2023 Subsidiary Parent 75,000 40% of sales 20%

On December 31, 2022 and 2023, intercompany accounts payable and receivable arising from intercompany sales was
fully settled.

2. In addition, there were no intercompany sales of PPE prior to 2022, information resulting from intercompany
sales of equipment are summarized below:
Date of Seller Selling Price Original Cost Accumulated Book Remaining Life
Sale Depreciation Value
2022 Pascal Company P90,000 P 120,000 P45,000 P75,000 5 years
2022 Sax Company 60,000 72,000 43,200 28,800 8 years

REQUIREMENT: Prepare the Consolidated FS on 2022 and 2023.

LPMS, CPA HAU, 2223-06 Page 1 of 2


AFAR REVIEW NOTES BUSINESS COMBINATION – INTERCOMPANY TRANSACTIONS

LPMS, CPA HAU, 2223-06 Page 2 of 2

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