REQUIRED: Using equity model (Partial Goodwill) prepare CONSOLIDATION WORKING PAPER for December 31, 20x4
On January 1, 20x4, P Company acquires 80% of the common stock of S Company for P452,000. S Company's statement of nancial position showed shareholder's equity of: Ordinary share capital, P10 par P240,000 Retained earnings 120,000 Total P360,000 At the same time, the following assets and liabilities of S Company had book values that were different from their respective market values: S Co. (BV) S Co. (MV) Inventory ................................................ P24,000 P20,000 Land ................................................ 48,000 60,000 Equipment ................................................ 280,000 280,000 Accum. depreciation equipment ...................... (96,000) Buildings ................................................ 360,000 180,000 Accum. depreciation buildings ............................ (160,000) Bonds payable (4 years) .................................... 120,000 135,200 All other assets and liabilities had book values approximately equal to their respective fair values. On January 1, 20x4, the equipment and buildings had a remaining life of 4 and 8 years respectively. Inventory is sold in 20x4 and FIFO inventory costing is used. Estimated goodwill (if any) annual impairment is 10% of remaining balance There were no intercompany sales prior to 20x4, information resulting from intercompany sales of equipment are summarized below Date of sale Seller Selling Price Orig. Cost Accum. Depr. Remaining Life 411 [20x4 P Co. P90,000 P120,000 P45,000 5 years 112/20x5 3 Co. 60,000 72,000 43,200 8 years Additional information resulting from intercompany sales, ending inventory and gross prot rates are summarized below: M Sales of P CO. to S Q. 12] 1 Intercom an In of S o. lntercompany Prot on Sales 20x4 P180,000 25% 20% 20x5 150,000 32% 25% Yr Sales of S Co. to P Co. 12131 lntercomgany lnv_ty of P Co. lntercompany Prot on Sales 20x4 P80,000 40% 20% 20x5 60,000 30% 40% Trial balances for the companies for the year ended December 31, 20x4 are as follows: Debits P Co. S Co. Cash ...................................................... 152,800 90,000 Accounts receivable .......................................... 90,000 60,000 Inventory ...................................................... 120,000 90,000 Land ...................................................... 210,000 48,000 Equipment ...................................................... 240,000 380,000 Building ...................................................... 720,000 540,000 Investment in S Co. .......................................... ? Cost of goods sold .......................................... 204,000 138,000 Depreciation expense .......................................... 60,000 24,000 Other expenses ...................................................... 48,000 18,000 Dividends paid ...................................................... 72,000 36,000 Credits Accum. Depreciation equipment ............................. 135,000 146,000 Accum. Depreciation buildings .............................. 405,000 288,000 Accounts payable ........................................... 105,000 238,800 Bonds payable ....................................................... 240,000 120,000 Common stock, P10 par ........................................... 600,000 240,000 Retained earnings .......................................... 360,000 120,000 Sales .................................................................. 480,000 240,000 Gain on sale of equipment ...................................... 15,000 31,200 Investment income in S .......................................... ? REQUIRED: Using equity model (Partial Goodwill) prepare CONSOLIDATION WORKING PAPER for December 31, 20x4
