The financial statements of P Co and its subsidiaries and associate are as follows:

Additional information

1. D Co was originally a subsidiary of P Co when P Co purchased an initial investment of 60% interest in D Co. On 1 January 20x5, P Co sold 20% interest in D Co, reducing the ownership interest in D Co to 40%.

2. The fair value of accounts receivable of B Co was lower than the book value because of an expected loss on a debtor. B Co recognized an incurred loss in 20x6 when the debtor went into bankruptcy. In 20x6, B Co expensed off $280,000 as impairment losses.

3. The undervalued inventory of C Co was disposed as follows:

4. P Co provided a long term loan to B Co on 1 September 20x5 to finance the construction of equipment. The use of the loan proceeds met the requirements of IAS 23 Borrowing Costs. B Co completed the construction of the equipment on 1 February 20x6 and commenced the depreciation of the equipment over a useful life of 5 years from that date. Residual value is negligible. The following interest income was recognized by P Co:

5. There was a sale of inventory from D Co to P Co, with details 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 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 Goodwill Fixed assets, net book value Investment in B Co Investment in D Co Investment in C Co Inventory Intercompany receivable Other net assets Cash Income Statement for year ended 31 December 20x6 P Co D Co 600,000 (120,000) Accounts payable Bank loans Intercompany payable Share capital Retained earnings Revaluation reserves Non-controlling interests B Co C Co 5,800,000 1,670,000 420,000 (1,160,000) (334,000) (81,400) 4,640,000 1,336,000 480,000 338,600 (320,000) (200,000) (150,000) 4,320,000 1,136,000 330,000 2,000,000 1,456,000 1,400,000 6,320,000 2,592,000 1,730,000 Statement of Financial Position as at 31 December 20x6 P Co B Co D Co 4,490,000 2,500,000 1,150,000 3,340,000 2,540,000 2,492,800 1,004,000 2,520,500 1,500,000 1,700,000 2,000,000 1,500,000 900,000 6,320,000 2,592,000 1,730,000 (100,000) 238,600 232,000 470,600 800,000 600,000 520,000 448,500 348,900 1,700,000 1,125,800 1,880,000 1,973,000 747,000 256,000 189,000 12,312,800 6,796,000 5,150,500 12,312,800 6,796,000 5,150,500 C Co Consolidated 761,000 557,200 56,000 1,723,100 676,500 420,000 470,600 156,000 Consolidated 1,723,100