Reference no: EM133014908

Question -

Q1. In 2014, Palma Company sold inventory costing P40,000 to its wholly owned subsidiary, Sentra Company, for P60,000.

Prepare the elimination entry required in consolidation at the end of 2014, 2015 and 2016 relating to this intragroup inventory transfer under each of the following assumptions:

a. All of the inventory was resold by the subsidiary in 2014 for P75,000.

b. All of the inventory was resold by the subsidiary in 2016 for P75,000

c. In 2014, 75% of the inventory was sold for P60,000, and the remaining 25% was sold in 2015 for P25,000.

Q2. In 2014, Palawan Company acquired inventory from Samar Company, its 75%-owned subsidiary, for P200,000. Samar's cost was P160,000. At December 31,2014, Palawan's statement of financial position showed P80,000 of intragroup acquired inventory on hand. Prepare the elimination entries.

Q3. The P Company owns 70% interest in the subsidiary S Co.

a. P Co. purchased merchandise for P100,000 from S Co.at a gross margin of 25%.The inventory of the parent company as of December 31, 2014 includes P40,000 of these merchandise.

b. On December 31, 2014, S Co. constructed for the P Company a machine costing P2,400,000 and billed the latter for P3,000,000. The machine had an estimated useful life of 8 years.

c. The ending inventory of S Co. includes merchandise acquired for P60,000 from the P Company. Cost to P Company was P48,000.

Prepare the elimination entries for each of the preceding cases as of December 31, 2014 prior to preparation of consolidated financial statements.