The financial statements of P Co and its subsidiaries and associate are shown below:

Additional information

1. Intangible assets of B Co had an indefinite useful life. On 31 December 20x6, the annual impairment test revealed a loss of $110,000.

2. Ninety percent of the undervalued inventory of C Co was sold to third parties during 20x5 and the remaining was written down to zero during 20x6.
3. P provided a loan to B to finance the self-construction of a warehouse. The warehouse was ready for use on 1 July 20x6 and had an estimated useful life of 10 years. The following transactions were recorded in P’s books:

4. Provision for loss of B Co was the present value of the expected loss on a claim by a third party. On 1 December 20x5, court hearings confirmed the actual loss of $100,000, which was recognized by B Co.
5. Apply a tax rate of 20% on all appropriate adjustments. Recognize tax effects on fair value adjustments.

Requirement

Prepare the consolidation and equity accounting entries for the year ended 31 December 20x6.

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Profit before tax Tax Profit after tax Income to NCI Dividends declared Profit retained Retained earnings, 1 Jan 20x6 Retained earnings, 31 Dec 20x6 Intercompany receivable Other net assets Cash Income Statement for year ended 31 December 20x6 P Co B Co D Co 4,377,000 1,558,000 677,000 (875,400) (311,600) (135,400) 3,501,600 1,246,400 541,600 391,200 Goodwill Intangible assets, net book value Fixed assets, net book value Investment in B Co Investment in D Co Investment in C Co Inventory Accounts payable Bank loans Intercompany payable Share capital Retained earnings Revaluation reserves Non-controlling interests (200,000) (130,000) (50,000) 3,301,600 1,116,400 491,600 2,416,000 850,900 876,600 5,717,600 1,967,300 1,368,200 Statement of Financial Position as at 31 December 20x6 P Co B Co D Co 2,844,000 3,500,000 800,000 2,063,000 4,050,400 1,400,000 1,459,000 820,000 610,000 510,000 820,000 1,800,000 2,384,000 1,382,000 815,450 320,000 700,000 150,000 12,468,000 5,575,000 2,934,450 C Co 489,000 (97,800) (80,000) 311,200 453,200 764,400 12,468,000 5,575,000 2,934,450 C Co 898,000 267,000 535,000 127,000 1,827,000 207,700 766,250 382,600 1,800,000 1,300,000 1,600,000 800,000 550,000 5,717,600 1,967,300 1,368,200 764,400 130,000 1,827,000 Consolidated Consolidated