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

Additional information

1. During 20x2, X Co recognized a litigation settlement of $200,000 in respect of the provision for claims on an award of damages to the plaintiff by the courts. The case is still pending the final outcome following appeal by the plaintiff for a higher award of damages.
2. During August 20x2, Y Co sold excess inventory to P Co as follows:

3. Intangible assets of Z Co had a remaining lease term of 5 years from date of acquisition.
4. The fair value of net assets of Y Co was close to its book value when acquired by X Co and P Co.
5. On 1 July 20x2, Z Co sold machinery to Y Co as follows:

6. Apply a tax rate of 20% on all appropriate adjustments. Recognize tax effects on fair value adjustments. Companies recognize impairment losses, if any, at the financial year-end.

Requirement

Prepare the consolidation and equity accounting entries for the year ended 31 December 20x3.

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Profit before tax.. Tax... Profit after tax Income to NCI Dividends declared.. Income Statement for year ended 31 December 20x3 P Co X Co Z Co Profit retained. Retained earnings, 1 Jan 20x3.... Retained earnings, 31 Dec 20x3. Y Co Consolidated 3,200,000 2,200,000 856,000 750,000 (640,000) (440,000) (154,080) (150,000) 2,560,000 1,760,000 701,920 600,000 (500,000) (230,000) (70,000) (134,000) 2,060,000 1,530,000 631,920 466,000 2,560,000 1,245,000 550,000 900,000 4,620,000 2,775,000 1,181,920 1,366,000