Scribd Logo
Upload

Welcome to Scribd!

  • 603 views

    Intercompany Sale of Fixed Assets

    Uploaded by

    asdasda
    On January 1, 2020, Entity J acquired Entity K and there were intercompany sales of fixed assets. In 2021, Entity K reported net income of P4,000,000 and distributed dividends of P1,200,000 to Entity J. The document provides information about the intercompany sales to compute consolidated figures for depreciation expense, carrying amount of fixed assets, non-controlling interest, and net income for 2021.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Intercompany Sale of Fixed Assets

    Uploaded by

    asdasda
    603 views5 pages
    On January 1, 2020, Entity J acquired Entity K and there were intercompany sales of fixed assets. In 2021, Entity K reported net income of P4,000,000 and distributed dividends of P1,200,000 to Entity J. The document provides information about the intercompany sales to compute consolidated figures for depreciation expense, carrying amount of fixed assets, non-controlling interest, and net income for 2021.

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    On January 1, 2020, Entity J acquired Entity K and there were intercompany sales of fixed assets. In 2021, Entity K reported net income of P4,000,000 and distributed dividends of P1,200,000 to Entity J. The document provides information about the intercompany sales to compute consolidated figures for depreciation expense, carrying amount of fixed assets, non-controlling interest, and net income for 2021.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    603 views5 pages

    Intercompany Sale of Fixed Assets

    Uploaded by

    asdasda
    On January 1, 2020, Entity J acquired Entity K and there were intercompany sales of fixed assets. In 2021, Entity K reported net income of P4,000,000 and distributed dividends of P1,200,000 to Entity J. The document provides information about the intercompany sales to compute consolidated figures for depreciation expense, carrying amount of fixed assets, non-controlling interest, and net income for 2021.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Intercompany Sale of Fixed Assets

    On January 1, 2020, Entity J acquired 80% of outstanding ordinary shares of Entity K at a


    goodwill of P1,440,000. On January 1, 2020, there was an upstream sale of land with a
    cost of P8,000,000 at a selling price of P8,800,000. The land was eventually sold by the
    buying affiliate to third persons the following year. On January 1, 2020, there was a
    downstream sale of equipment with a cost of P1,600,000 and accumulated depreciation
    of P320,000 at a selling price of P1,440,000. The equipment is already 4 years old at the
    date of sale.

    On July 1, 2021, there was an upstream sale of machinery with a cost of P2,160,000 and
    accumulated depreciation of P1,440,000 at a selling price of P480,000. The machinery is
    already 6 years old at the date of sale. For the year ended December 31, 2021, Entity J
    reported net income of P6,400,000 while Entity K reported net income of P4,000,000
    and distributed dividends of P1,200,000. Entity J accounted for its investment in Entity K
    using cost method in its separate financial statements.

    1. Compute the consolidated depreciation expense of the fixed assets in 2021


    A. P338,664C. P493,336
    B. P440,000D. P320,000

    2. Compute the consolidated carrying amount of the depreciable fixed assets on


    December 31, 2021
    A. P1,800,000C. P1,680,000
    B. P1,720,000 D. P1,600,000

    3. Compute the non-controlling interest in net income for 2021


    A. P832,000C. P992,000
    B. P1,000,000 D. P840,000

    4. Compute the consolidated net income attributable to parent shareholders for 2021
    A. P8,790,000C. P9,650,000
    B. P9,450,000 D. P10,610,000

    Solution:

    1/1/2020 Upstream Sale of Land

    Proceeds P8,800,000
    Recorded amountP8,000,000

    Gain on Sale of Land (per books)P 800,000

    Realized Gain in 2020 Consolidated F/S -


    Realized Gain in 2021 Consolidated F/S P 800,000

    1 | Page
    1/1/2020 Downstream Sale of Equipment

    ProceedsP1,440,000
    Book Value (1,600,000 – 320,000)P1,280,000

    Gain on Sale of Equipment (per books)P 160,000

    Realized Gain in 2020 and 2021 Consolidated F/S

    P160,000 / *16 yrs. P 10,000

    *Accumulated Depreciation P320,000 / 4yrs. old


    P80,000 annual depreciation

    Original Cost of EquipmentP1,600,000/80,000 = 20 yrs. original life

    7/1/2021 Upstream Sale of Machinery

    ProceedsP 480,000
    Book Value (2,160,000 – 1,440,000) 720,000

    Loss on Sale of Machinery (per books)P (240,000)

    Realized Loss in 2021 Consolidated F/S

    P240,000 / *3 = P80,000 x 6/12P (40,000)

    *Accumulated Depreciation P1,440,000 / 6 yrs. old


    P240,000 annual depreciation

    Original Cost of MachineryP2,160,000/240,000 = 9 yrs. original life

    Working Paper Entries in 2020/

    13. To eliminate the Intercompany Sale of Land during the year.

    Gain on Sale of Land 800,000 (UG)


    Land 800,000

    14. To Eliminate the Intercompany Sale of Equipment during the year.

    Gain on Sale of Equipment 160,000 *1,440,000 - 1,280,000


    Equipment 160,000 * 1,600,000 - 1,440,000
    Accumulated Depreciation 320,000

    Gain
    Equip, net

    160,000/16 = 10,000 RG

    15. To Recognize the Realized Gain on Intercompany Sale of Equipment

    2 | Page
    Accumulated Depreciation 10,000
    Depreciation expense 10,000 (RG)

    books 1,440,000/16 = DEpr of new owner 90,000


    conso 1, 280,000/16 = Depr of orig owner 80,000

    *Loss 1,280,000BV : Proceeds 1,120,000 Loss 160,000

    1,120,000 / 16 = 70,000
    1,280,000/ 16 = 80,000

    Depr Exp 10,000 (RL)


    Acc Depr 10,000

    Working Paper Entries in 2021

    13. To eliminate the Intercompany Sale of Machinery during the year.

    *Machinery1,680,000
    *Accumulated Depreciation1,440,000
    *Loss on Sale of Machinery 240,000 (UL)

    ProceedsP 480,000 vs. 720,000 (BV) = 240,000


    Book Value (2,160,000 – 1,440,000) 720,000

    Loss on Sale of Machinery (per books)P (240,000)

    Orig cost (Prev Owner) 2,160,000 New Owner (SP) 480,000

    14. To recognize the Realized Loss on the Intercompany Sale of Machinery.

    Depreciation Expense 40,000 (RL)


    Accumulated Depreciation 40,000

    240,000/3 = 80,000x 6/12 = 40,000

    480,000 / 3 = 160,000
    720,000/3 = 240,000 80,000 x 6/12 = 40,000

    15. To recognize the Realized Gain on the Intercompany Sale of Land.

    3 | Page
    S P O
    8M 8.8 M 9M
    200,000 gain

    Retained Earnings 640,000


    NCINAS 160,000
    Gain on Sale of Land 800,000
    or

    Retained Earnings 640,000


    NCINAS 160,000
    Land 800,000

    Land 800,000
    Gain on Sale of Land 800,000

    16. To Eliminate the Intercompany Sale of Equipment last year.(D)

    Retained Earnings 160,000


    Equipment 160,000
    Accumulated Depreciation320,000

    17. To recognize the Realized Gain on the Intercompany Sale of Equipment.

    Accumulated Depreciation 20,000 (as of two years)


    Depreciation Expense 10,000 (RG in 2021)
    Retained Earnings 10,000 (RG in 2020)

    Supplemental Problem COMPOUND ENTRY

    RE 150,000
    Equipment 160,000
    Accum Depreciation 300,000
    Depr Exp 10,000
    ------------------------------------

    2020
    RE 150,000
    EQUIP 160,000
    ACCUM DEPR 310,000

    RG this year (2021)

    Accum Depr 10,000


    Depr 10,000

    4 | Page
    Consolidated Depreciation Expense 2021

    EquipmentP 80,000
    MachineryP240,000 P320,000

    Consolidated Book Value of Depreciable Fixed Assets in 2021

    EquipmentP1,600,000
    Accumulated Depreciation (480,000) 320,000 + 160,000
    P1,120,000

    MachineryP2,160,000
    Accumulated Depreciation (1,560,000)
    P 600,000 1,440,000 + 120,000

    P1,720,000

    Total Controlling Non-Controlling


    Net Income of Parent (books) P6,400,000 P6,400,000 -
    Net Income of Subsidiary (books) 4,000,000 3,200,000 P800,000

    Add/Deduct Amortization of Excess


    Less: Impairment of Goodwill
    Less: Interco. Dividend Revenue (960,000) (960,000)
    Add: Gain from Bargain Purchase

    Add: RG – Land 800,000 640,000 160,000

    Add: RG – Equipment 10,000 10,000

    Add: UL – Machinery 240,000 192,000 48,000


    Less: RL – Machinery (40,000) (32,000) ( 8,000)
    P10,450,000 P9,450,000 P1,000,000

    -end of material-

    5 | Page

    You might also like