QUESTION 2 Below are the summarized income statement and balance sheet of P Ltd and S Ltd for the year ended 31 Dec 2020. P Ltd acquired a 60% equity stake in S Ltd on 31 Dec 2019 for $150,000. At the time of acquisition, the assets and liabilities of S were fairly valued, and the fair value of the equity of S was determined to be $120,000. P adopts the policy of consolidating S using the acquisition method of accounting for business combinations and records the investment in S at cost. Assume no tax, no dividends and no value impairment on goodwill. FYE 31 Dec 2020 ($'000) P Ltd S Ltd Income Statement: Sales 440 300 Cost of sales (140) (150) Operating expenses (170) (115) Net Profit 130 35 Balance Sheet: Cash 25 10 Inventory 65 45 Accounts receivable 50 25 Investment in S (at cost) 150 - Property, plant & 200 100 equipment Total Assets 490 180 Accounts payable 40 30 Other liabilities Share capital 65 20 50 30 Retained earnings 335 100 Liabilities & Equity 490 180 Required: Assume that P opts to value any non-controlling interest in the acquired companies at fair value under IFRS 3. Prepare consolidated income statement and balance sheet of P Ltd and its subsidiary for the year ended 31 Dec 2020. Show all relevant workings, and reference each set of adjustment entries you have made with a suitable footnote to briefly explain the reasons for those adjustments.