Question

Required: 1. Prepare the con are the consolidation and equity accounting entries for the year eaded 31 December 20x5 with narratives and workings). m analytical checks on the following balances as at 31 December 2015 2 Perform analytics (a) Non-controlling interests and (b) Investment in associate. P6.8 Comprehensive problem set P Co acquired a 90% OW quired a 90% ownership interest in Y Co on 1 January 20x3. At the date of acquisition, the share Joy Co was $1,000,000, and the retained earnings balance was $500,000. The book values of assets co were close to their fair values, with the exception of inventory that was undervalued by $100,000. cold the undervalued inventory in 20x3. The fair value of non-controlling interests was $200,000 as of Y Co were close to at the date of acquisition On1 January 20x4, P Co acquired a 30% ownership interest in Z Co. At that date, the share capital of Co was $200,000 while its retained earnings balance was $400,000. Z Co had an unrecognized intangible asset with a reliable fair value of $240,000. The intangible asset had a useful life of five years from the date of acquisition. In 20x4, Y Co sold inventory to P Co at a transfer price of $360,000. The original cost of the inventory was $200,000. Ninety percent of the inventory remained unsold at the end of 20x4; 10% of the original inventory remained unsold as at the end of 20x5. On 1 January 20x5, Z Co transferred machinery to P Co at an invoiced price of $296,000. The original cost of the machinery was $360,000; the profit on sale recorded by Z Co from the transfer was $8,000. The machinery had an original useful life of five years with no residual value. As at 1 January 20x5, the remaining useful life of the machinery was four years with no change to its estimated residual value. Assume a tax rate of 20%. Recognize tax effects of fair value adjustments. The financial statements for PCO, Y Co and Z Co for the financial year ended 31 December 20x5 are shown below. Income Statement For Year Ended 31 December 20x5 РСо Y COZ Co Profit before tax...................... $3,000,000 $1,200,000 $600,000 Tax.. (600,000) (240,000) (100,000) $2,400,000 S960,000 $ 500,000 (300,000) (200,000) (60,000) $2,100,000 $760,000 $ 440,000 1,000,000 900,000 560,000 $3,100,000 $1,660,000 $1,000,000 Profit after tax. Dividends declared ............. .. . Profit retained ............... Retained earnings, 1 January 20x5............. Retained earnings, 31 December 20x5.............

Answer 1

Warking Nole -I. Calcuation of Identifiable Net Asset of yco. chunges nate (subsidiary) of consolidation 1660.000 3160,000 11,60,000 Date of Acq, ( 1 Jan 2003) Sharecap 1,000,000 Relatos 500.000 1500,000 Add : Incashiy 100,000 y less: D.I.L. (20,000) less: Up Stock INA: 1580,000 Profit of parent Nem-cont.int. working Note - 2 calculation of (16,000) 11,44,000 2029,600 194400 Goodwill / cap. Reserve Total Investment 19,00,000 Adel: Non-controlling Int. 2,00,000 less: identificable Net Asset (15,80,000) - Goodwill 5,20,000 Working Noke-3 calculation of Non cont. Interest (year End) Add: Opening holanie Post Acg. Profit closing balance 200,000 114400 31 4400

10 Most of z changes Working Mote - 4 Calculation of u pute of Acquition Sharecap. 200,000 Ret - Earning 400,000 600,000 oo (Associate pate of consolidation 200,000 10,00,000 .600,000 600,000 Adel: Uboccoge. (96,000) IntangibleAss. 240,000 lesso Denoec" less'. Depois - D.D.L. (42000) esp 792000 (less upon Asset royooo (6000) 792000 Parent NCI 498000 348600 a 144400 1 1494 348600 -

** calculation of up on sule of machinery. o 288000 Book value on tf ( 296000 78000) Depreciation it Not the 288000 72000 2 . 216 620 2) 9220 0 Depreciation 296000 - 296000 After tlf 74000 :.U) Bufit Good

Date: _/ Page no: working Note - 5 warg Mewation of Retained earning (consolidated) 32,00,000 Add: closing hulunce Post Ag profit A 10,29,600 1 49400 tesso creditionat densel. 42,79,000

sheet. Consolidated Balance 47,00,000 749400 520,000 fixed Assets ( 3200,000 € 15,00,000) Inus in co, z (600,000 + 149400) Goodwil) (w.Nod) Inventory. (800,000 $600,000 $100,000 -16000) Account Receivable cosh (80,000 + 20,000) 1484000 830,000 100,000 83,83,400_ 100gooo Shure Capital Non-controlling Int (W.N. 3) Account Payable (2750,000+ 20,000) Retained cuspiny (We ne ) Deffered tax Mability 314100 27,70,000 42,79,000 20,000 18383 400
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