M. Acquisition method and non-controlling interests of fair value p Concquired control of Jasper Co through acquisition of 90% in the voting rights of Jasper Co on 1 July 20x2. A cash transfer of $2,000,000 was made to the former owners of Jasper Co. P Co elects to measure non controlling interests at fair value on acquisition date. The fair value of non-controlling interests on 1 July 20x2 was $200,000. The shareholders' equity of Jasper Co at acquisition date is as follows: Share capital........ Retained earnings... Revaluation reserves $ 500,000 450,000 100,000 $1,050,000 The fair and book values of identifiable net assets of Jasper Co at acquisition date is shown below: Inventory Fixed assets Other net assets Book value Fair value Remarks $ 200,000 $250,000 60% were sold during 20x3 450,000 500,000 Remaining useful life at acquisition was 5 years. 400,000 400,000 $1,050,000 $1,150,000 The financial statements of P Co and Jasper Co are shown below: Statement of Comprehensive Income For Year Ended 31 December 20x3 P CO Profit before tax. $4,000,000 Tax....... (800,000) Profit after tax $3,200,000 Change in revaluation reserves, after-tax. Comprehensive income $3,200,000 Jasper Co $1,000,000 (200,000) $ 800,000 100,000 $ 900,000 Jasper Co Statement of Changes in Equity For the Year Ended 31 December 20x3 (partial) P Co Jasper Co Retained Retained earnings earnings $ 840,000 $ 400,000 3,200,000 800,000 (180,000) (100,000) $3,860,000 $1,100,000 Jasper Co Revaluation reserves $400,000 100,000 +++++++++ Balance, 1 January 20x3. Comprehensive income Dividends declared. Balance, 31 December 20x3. Total $ 800,000 900,000 (100,000) $1,600,000 $500,000 .. 232 ADVANCED FINANCIAL ACCOUNTING Jasper Co $2,200,000 Statement of Financial Position As at 31 December 20x3 P CO $2,400,000 2,000,000 720,000 Fixed assets, net book value.... Investment in Jasper Co... Inventory ..... Intercompany receivable Accounts receivable...... Dividend receivable from Jasper Cash... 500,000 300,000 550,000 800,000 72,000 60,000 $6,052,000 20,000 $3,570,000 $1,390,000 Payables Intercompany payable Dividend payable Share capital...... Retained earnings. Revaluation reserves $ 712,000 300,000 180,000 1,000,000 3,860,000 80,000 500,000 1,100,000 500,000 $3,570,000 $6,052,000 Required 1. Prepare the consolidation adjusting entries for the year ended 31 December 20x3. Tax rate was 20%. Recognize tax effects on fair value differentials. 2. Perform an analytical check of the balance of non-controlling interests as at 31 December 20x3