P Co acquired a controlling interest in 90% of X Co. The financial statements of P Co and X Co and other relevant details are shown below. All figures are in dollars, unless as otherwise indicated.

Additional information

1. The under-valued equipment of X Co as at the date of acquisition had a remaining life of ten years. On 1 January 20x6 as result of technical problems, the remaining useful life was revised to five years.
2. On 1 January 20x6, X Co transferred excess fixed assets to P Co at the transfer price of $120,000. The original cost of the fixed assets was $150,000 and the accumulated depreciation was $90,000. The original useful life was six years and the estimated remaining useful life at transfer date was three years. Residual value was negligible.
3. P Co sold inventory to X Co on 30 September 20x5 at a transfer price of $145,000. The original cost as carried in P Co’s books prior to the transfer was $120,000. Thirty percent of the inventory remained unsold as at 31 December 20x5 and ten percent of the original inventory remained unsold as at 31 December 20x6.
4. Tax rate was 20% throughout. Recognize tax effects on fair value adjustments.

Required

(a) Prepare consolidation adjusting entries for the year ended 31 December 20x6.

(b) Perform an analytical check on the balance of non-controlling interests as at 31 December 20x6.

(c) Perform an analytical check on the balance of consolidated retained earnings as at 31 December 20x6.

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Income Statement and partial Statement of Changes in Equity for year ended 31 December 20x6 Profit before tax. Tax.... Profit after tax. Dividends declared. Profit retained.. Retained earnings, 1 Jan 20x6. Retained earnings, 31 Dec 20x6. X Co P Co 2,200,000 890,000 (440,000) (178,000) 1,760,000 712,000 (120,000) (45,000) 1,640,000 667,000 935,000 220,000 2,575,000 887,000