Reference no: EM133184656

Question - Jolly Corporation acquired 75% of the outstanding shares of Wally Company on January 2, 2019 for a consideration transferred of P4,320,000. The price paid includes a control premium amounting to P120,000. On the date of acquisition, the related cost of business combination amounted to P80,000. On January 2, 2019, Wally Company's stockholders' equity accounts were as follows: Ordinary Shares - P5,700,000 and Retained Earnings - P1,860,000. An examination of the acquired company's assets and liabilities on the date of acquisition revealed that there were assets with book values different from their fair values. The merchandise inventory of Wally is overstated by P180,000; land is undervalued by P900,000; equipment was overvalued by P720,000 and copyright was undervalued by P540,000. The merchandise inventory was all sold in 2019. The equipment had a remaining life of 8 years while the copyright had a remaining life of 5 years.

During 2019, intercompany sales of merchandise on account amounted to P1,980,000, of which P126,000 is from upstream sales. Likewise, the December 31, 2019 inventory includes P144,000 from downstream sales. Jolly Corporation's mark-up was 20% on sales while Wally Company's selling price is at 120% of cost.

On the second day of the second month of the second quarter of 2020, there was an upstream sale of land for P2,700,000. On this date, the land was carried on the selling company's books at P2,340,000, an amount which is equal to the fair value on the date of acquisition. On the first day of the last month of the third quarter of 2020, there was a downstream sale of furniture for P300,000. On this date, the furniture was carried on the selling company's books, net of accumulated depreciation, at P210,000. The furniture was estimated to have a remaining life of 5 years on the date of sale. On the first day of the last month of the year 2020, there was an upstream sale of building for P6,720,000. On this date, the building was carried on the selling company's books, net of accumulated depreciation, at P8,160,000. The building was estimated to have a remaining life of 8 years on the date of sale.

During 2020, intercompany sales of merchandise on account amounted to P3,240,000, of which P360,000 is from upstream sales. Likewise, the December 31, 2020 inventory includes P270,000 from downstream sales. The acquirer corporation accounts for its investment in subsidiary account using the cost method. The trial balances as of December 31, 2020 are as follows:

	Jolly Corporation	Wally Company
Cash	3,240,000	1,800,000
Trade receivable	1,020,000	960,000
Merchandise inventory	2,640,000	1,740,000
Furniture, net	720,000	540,000
Equipment, net	1,140,000	660,000
Building, net	9,060,000	6,540,000
Machinery, net	480,000	360,000
Land	5,880,000	3,000,000
Copyright, net	660,000	240,000
Investment in Wally Company	4,320,000	-
Liabilities	(3,930,000)	(2,700,000)
Ordinary shares	(11,400,000)	(5,700,000)
Retained earnings	(7,200,000)	(4,200,000)
Dividends declared	2,280,000	1,920,000
Sales	(16,800,000)	(9,600,000)
Gain on sale of furniture	(90,000)	(120,000)
Gain on sale of land	(1,200,000)	(360,000)
Dividend revenue	(1,980,000)	(720,000)
Cost of goods sold	6,900,000	2,400,000
Expenses	3,840,000	1,620,000
Loss on sale of machinery	60,000	180,000
Loss on sale of building	360,000	1,440,000

Required - What is the consolidated net income for the year ended December 31, 2020?