P Co acquired 80% interest in Y Co on 1 January 20x1. Income Statement for the year ended 31 December 20x3 P Co Y Co Operating profit $3,000,000 $980,000 Dividend income from Y 400,000 Interest income Y and bank 120,000 Interest expense to P (100,000) Profit before tax $3,520,000 $880,000 Tax @ 20% (704,000) (176,000) Profit after tax $2,816,000 $704,000 Dividends declared (800,000) (500,000) Profit retained $2,016,000 $204,000 Retained earnings, 1 January 4,450,000 690,000 Retained earnings, 31 $6,466,000 $894,000 December Statement of Financial Position as at 31 December 20x3 Y Co Investment in Y Co $1,200,000 Fixed assets 5,000,000 $1,570,000 Loan receivable from Y CO 800,000 Inventory 1,020,000 330,000 Accounts receivable 780,000 170,000 Cash 316,000 114,000 $9,116,000 $2,184,000 Share capital Retained earnings Loan payable to P Accounts payable $2,000,000 6,466,000 $400,000 894,000 800,000 90,000 $650,000 Other payables $9,116,000 $2,184 ,000 Details of acquisition of Y Co by P Co: Date of purchase: Percentage acquired Share capital Retained earnings 1 Jan 20x1 80% $400,000 500,000 $900,000 Additional information: 1. Fair value of fixed assets of S Co as at acquisition was $1,200,000 while its book value was $1,000,000. Remaining useful life for the fixed assets as at acquisition date was four years and the residual value of the fixed assets was zero. 2. Fair value of non-controlling interests as at acquisition was $240,000. 3. Tax rate is 20%. Recognize tax effects on fair value adjustments. Required (a) Prepare the consolidation adjustments for the year ended 31 December 20x3. (b) Perform an analytical check of the non-controlling interests' balance as at 31 December 20x3. P Co acquired 80% interest in Y Co on 1 January 20x1. Income Statement for the year ended 31 December 20x3 P Co Y Co Operating profit $3,000,000 $980,000 Dividend income from Y 400,000 Interest income Y and bank 120,000 Interest expense to P (100,000) Profit before tax $3,520,000 $880,000 Tax @ 20% (704,000) (176,000) Profit after tax $2,816,000 $704,000 Dividends declared (800,000) (500,000) Profit retained $2,016,000 $204,000 Retained earnings, 1 January 4,450,000 690,000 Retained earnings, 31 $6,466,000 $894,000 December Statement of Financial Position as at 31 December 20x3 Y Co Investment in Y Co $1,200,000 Fixed assets 5,000,000 $1,570,000 Loan receivable from Y CO 800,000 Inventory 1,020,000 330,000 Accounts receivable 780,000 170,000 Cash 316,000 114,000 $9,116,000 $2,184,000 Share capital Retained earnings Loan payable to P Accounts payable $2,000,000 6,466,000 $400,000 894,000 800,000 90,000 $650,000 Other payables $9,116,000 $2,184 ,000 Details of acquisition of Y Co by P Co: Date of purchase: Percentage acquired Share capital Retained earnings 1 Jan 20x1 80% $400,000 500,000 $900,000 Additional information: 1. Fair value of fixed assets of S Co as at acquisition was $1,200,000 while its book value was $1,000,000. Remaining useful life for the fixed assets as at acquisition date was four years and the residual value of the fixed assets was zero. 2. Fair value of non-controlling interests as at acquisition was $240,000. 3. Tax rate is 20%. Recognize tax effects on fair value adjustments. Required (a) Prepare the consolidation adjustments for the year ended 31 December 20x3. (b) Perform an analytical check of the non-controlling interests' balance as at 31 December 20x3
