Prepare consolidated working paper.

Prepare consolidated income statement, consolidated financial position, and consolidated statement of changes in retained earnings.

On January 1, 2020, P Company acquired 40,000 shares of S Company in the open market for P2,280,000. On that date, the assets and liabilities of S Company had book values that approximate their respective fair market values except inventory that has a value of P120,000 and a book value of P100,000 and equipment that has a value of P100,000 more than its carrying amount. This equipment has a remaining useful life of 5 years. Goodwill, if any, is to be tested for impairment at the end of each year. P Company elects to measure non-controlling interest at its proportionate share of the identifiable net assets. On December 31, 2020, S Company owed P Company P10,000 on open account from purchases made last year and paid half of it on February 15, 2021. Goodwill impairment losses in 2020 is P10,000. Financial statements for the two corporations for the year ended December 31, 2021 are as follows: Income Statement P Company S Company Sales P4,000,000 P2,000,000 Cost of sales (1,600,000) (1,200,000) Gross profit P2,400,000 P800,000 Operating expenses (1,560,000) (440,000) Operating income P840,000 P360,000 Dividend income 96.000 Net Profit P936,000 P360,000 Statement of Changes in RE Balance, January 1, 2021 P6, 136,000 P1,840,000 Profit 936,000 360,000 Dividend declared (800,000) (120,000) Balance, December 31, 2020 P6,272,000 P2,080,000 Financial Position Cash P1,472,000 P1,010,000 Accounts receivable 400,000 400,000 Inventories 800,000 600,000 Land 1,200,000 Building (net) 700,000 Equipment (net) 1,750,000 1,500,000 Investment in subsidiary 2,280,000 Total Assets P8,602,000 P3,510,000 Accounts payable P580,000 P430,000 Bonds payable (face amount 150,000 P200,000) Ordinary share capital, P100 par 1,000,000 Ordinary share capital, P20 par 1,000,000 Additional paid in capital 600,000 Retained earnings 6,272,000 2,080,000 Totals P8,602,000 P3,510,000 Requirement: Prepare consolidated working paper