1. On 1 January 20x1, P Co purchased 70% of S Co by issuing 1,000,000 new shares to the owners of S. The fair value of the consideration paid by P to acquire S was $2,100,000. The fair value of NCI at the acquisition date was $900,000.

2. On 1 January 20x2, P acquired a 40% ownership interest in A Co by making a cash payout of $200,000 to the owners of A.

3. The following information relates to statements of financial position at the date of acquisition:

4. The following statements relate to the financial year ended 31 December 20x3.

5. Additional information:

1. Impairment of in-process R&D of $100,000 was expensed off in the consolidated financial statements of P in 20x2.

2. Undervalued inventory as of 1 January 20x1 was sold in 20x1.

3. The contingent liability of $50,000 in respect of legal claims was paid off by S in 20x3 and recognized as an expense by S in 20x3.

4. The following sales of inventory were made during 20x2 and 20x3:Undervalued fixed assets of A had a useful life of 5 years from the date of acquisition.

5. There is no change in the share capital of S and A from the acquisition date.

6. Assume a tax rate of 20%.

Required (Ignore all tax effects):
1. Prepare the consolidation adjusting entries for the year ended 31 December 20x3.

2. Prepare the equity accounting entries for the year ended 31 December 20x3, with brief narratives.

3. Complete the consolidation worksheet on Page 3.

4. Prepare the consolidated income statement for the year ended 31 December 20x3 and the consolidated statement of financial position as of 31 December 20x3.