P4.7 (Revised) 1. P Co acquired a controlling interest in Moonstone Co as follows: Interest acquired 90% Date of acquisition 1 January 20x1 2. At acquisition date, the shareholders' equity of Moonstone Co was as follows: Share capital $1,320,000 Retained earnings 550,000 $1,870,000 3. The fair and book values of identifiable net assets of Moonstone Co at date of acquisition were as follows: Book value $120,000 Inventory Intangible assets Other net assets Fair value Remarks $180,000 Sold by Moonstone during 20x1 250,000 Remaining useful life was 5 years 1,750,000 $2,180,000 1,750,000 $1,870,000 4. P Co chose to measure non-controlling interests at fair value on acquisition date. The fair value of non-controlling interests in Moonstone Co as at date of acquisition was $250,000. 5. On 31 December 20x3, P Co estimated that 10% of the original goodwill was impaired. 6. The financial statements of P Co and Moonstone Co for the year ended 31 Dec 20x3 are shown in the Consolidation Worksheet on Page 2. 7. Assume tax rate was 20%. Required (Ignore all tax effects): 1. Prepare the consolidation adjusting entries for the year ended 31 December 20x3. 2. Complete the consolidation worksheet for the year ended 31 December 20x3. Consolidation Worksheet Income Statement and Statement of Changes in Equity (Partial) for the year ended 31 Dec 20x3 Consolidation Adjustments P Co Moonstone Col Dr Cr Consolidated Totals Profit before tax $2,000,000 $500.000 Tax Net profit after tax (391.000) 1,609,000 (100,000) 400,000 Retained earnings, 1 Jan 760,000 520,000 Dividends declared Retained earnings, 31 Dec (100.000) S2.269.000 (50.000) S870.000 Statement of Financial Position as at 31 Dec 20x3 Consolidation Adjustments Moonstone Col Dr Cr P Co Consolidated Totals Fixed assets, net book value Investment in Moonstone Co $2,500,000 2.600,000 $1,630,000 Inventory Accounts receivable Dividends receivable from Moonstone Cash 900,000 1,000,000 45,000 500,000 620,000 80.000 $7.125.000 150.000 $2.900.000 Accounts payable Dividends payable Share capital Retained earnings $2.826,000 30.000 2.000.000 2.269.000 $660.000 50.000 1,320.000 870.000 S7.125.000 $2.900.000 2