P Co acquired the voting shares of Silver Co and Amber Co, details as follows: Income Statement and partial Statement of Changes in Equity for the year ended 31 December 20x6 P Co Silver Co Amber Co Profit before tax 900,000 3,000,000 2,000,000 (600,000) (400,000) (200,000) Tax Profit after tax 2,400,000 1,600,000 Dividends declared Profit retained 700,000 (220,000) (100,000) (90,000) 2,180,000 1,500,000 610,000 5,500,000 1,600,000 720,000 Retained earnings, 1 Jan 20x6 Retained earnings, 31 Dec 20x6 7,680,000 3,100,000 1,330,000 Abridged Statement of Financial Position as at 31 December 20x6 P Co Silver Co Amber Co Investment in Silver Co Investment in Amber Co Other net assets 3,200,000 1,100,000 5,880,000 4,100,000 2,050,000 10,180,000 4,100,000 2,050,000 Share capital 2,500,000 1,000,000 500,000 7,680,000 3,100,000 1,330,000 Retained earnings Other comprehensive income 220,000 10,180,000 4,100,000 2,050,000 Amber Co 1 Jan 20x3 1 Jan 20x5 80% 35% Date of acquisition Percentage acquired by P Co Shareholders' equity at date of acquisition Share capital 1,000,000 500,000 Retained earnings 800,000 700,000 Other comprehensive income 80,000 1,800,000 1,280,000 Other comprehensive income at 1 Jan 20x6 100,000 Fair and book values of identifiable net assets of each company at date of acquisition Silver Co- Amber Co- Book value Fair value Book value Fair value 220,000 250,000 Inventory Intangible asset 800,000 Other net assets 1,580,000 1,580,000 1,280,000 1,280,000 Total net assets 1,800,000 1,830,000 1,280,000 2,080,000 Fair value of non-controlling interests $320,000 Additional information: 1. The under-valued inventory was disposed as follows: 70% was re-sold to third party customers by 31 December 20x5. 30% remained unsold at 31 December 20x6. The fair value of inventory as at 31 December 20x6 was $66,000. Impairment loss, if any, will be recognised. 2. The intangible asset of Amber Co had remaining useful life of ten years at acquisition date. At the year-end impairment review, the recoverable amount of the intangible asset showed the following recoverable amounts: As at 31 December 20x5 $600,000 $630,000 As at 31 December 20x6 Any impairment loss/ reversal of impairment loss will be recognised. 3. On 1 July 20x6, Silver Co transferred the following inventory to P Co: Transfer price $80,000 Original cost (book value) $90,000 Forty percent of the inventory was unsold as at 31 December 20x6. Silver Co 4. On 1 July 20x5, P Co transferred fixed assets to Amber Co at a transfer price of $500,000. The original cost of the fixed asset was $520,000 while the net book value was $420,000. The original useful life was five years. The remaining useful life as at 1 July 20x5 was four years. 5. Silver Co provided construction services to P Co in relation to the construction of an office building of P Co. Applying the requirements of FRS 18 Revenue, Silver Co used the percentage of completion method to recognize income. P Co capitalized the progress billings in its capital work-in-progress pending the completion of its building. P completed the construction of the building on 1 October 20x6 and depreciated the building over a 20 year period from 1 October 20x6. The project fee information was as follows: 31 Dec 20x5 31 Dec 20x6 600,000 800,000 Construction revenue for year Construction costs for year Construction profit for year (400,000) (700,000) 200,000 100,000 Progress billings to date 500,000 1,400,000 The project account was kept open until the end of the warranty period on 1 October 20x7. 6. In conjunction with the same building project, P Co engaged Amber Co to act as a sub- contractor on the piling works. Amber Co completed the project on 30 June 20x5. Details are as follows: Sub-contractors' annual construction revenue of Amber Co earned from P Co 31 December 20x5 Construction revenue $500,000 Construction costs ($400,000) $100,000 Construction profit 7. During 20x5, Amber Co sold excess building materials (inventory) to P Co as follows: Transfer price $50,000 $40,000 Original cost (book value) P Co used the materials in the construction of the building that was completed on 1 October 20x6. 8. All intercompany balances were settled before the year-end. Assume that all companies reviewed assets for impairment losses at the financial year-end. 9. Tax rate is 20%. Assume that fair value over book value differentials will lead to future taxable income. Required (a) Prepare equity accounting entries for Amber Co for the year ended 31 December 20x6, with narratives (brief headers) and workings in accordance with IAS 28 Investments in Associates. (23 marks) (b) Calculate the balance in Investment in Amber Co as at 31 December 20x6, showing the workings clearly. (11 marks) (c) Prepare consolidation entries relevant to Silver Co for the year ended 31 December 20x6, with narratives (brief headers) and workings in accordance with IFRS 3 (2009) and IFRS 10 (2011). (50 marks) (d) Calculate the balance of non-controlling interests in Silver Co as at 31 December 20x6, showing the workings clearly. (9 marks) (e) Calculate the balance of consolidated retained earnings as at 31 December 20x6, showing the workings clearly. (7 marks) P Co acquired the voting shares of Silver Co and Amber Co, details as follows: Income Statement and partial Statement of Changes in Equity for the year ended 31 December 20x6 P Co Silver Co Amber Co Profit before tax 900,000 3,000,000 2,000,000 (600,000) (400,000) (200,000) Tax Profit after tax 2,400,000 1,600,000 Dividends declared Profit retained 700,000 (220,000) (100,000) (90,000) 2,180,000 1,500,000 610,000 5,500,000 1,600,000 720,000 Retained earnings, 1 Jan 20x6 Retained earnings, 31 Dec 20x6 7,680,000 3,100,000 1,330,000 Abridged Statement of Financial Position as at 31 December 20x6 P Co Silver Co Amber Co Investment in Silver Co Investment in Amber Co Other net assets 3,200,000 1,100,000 5,880,000 4,100,000 2,050,000 10,180,000 4,100,000 2,050,000 Share capital 2,500,000 1,000,000 500,000 7,680,000 3,100,000 1,330,000 Retained earnings Other comprehensive income 220,000 10,180,000 4,100,000 2,050,000 Amber Co 1 Jan 20x3 1 Jan 20x5 80% 35% Date of acquisition Percentage acquired by P Co Shareholders' equity at date of acquisition Share capital 1,000,000 500,000 Retained earnings 800,000 700,000 Other comprehensive income 80,000 1,800,000 1,280,000 Other comprehensive income at 1 Jan 20x6 100,000 Fair and book values of identifiable net assets of each company at date of acquisition Silver Co- Amber Co- Book value Fair value Book value Fair value 220,000 250,000 Inventory Intangible asset 800,000 Other net assets 1,580,000 1,580,000 1,280,000 1,280,000 Total net assets 1,800,000 1,830,000 1,280,000 2,080,000 Fair value of non-controlling interests $320,000 Additional information: 1. The under-valued inventory was disposed as follows: 70% was re-sold to third party customers by 31 December 20x5. 30% remained unsold at 31 December 20x6. The fair value of inventory as at 31 December 20x6 was $66,000. Impairment loss, if any, will be recognised. 2. The intangible asset of Amber Co had remaining useful life of ten years at acquisition date. At the year-end impairment review, the recoverable amount of the intangible asset showed the following recoverable amounts: As at 31 December 20x5 $600,000 $630,000 As at 31 December 20x6 Any impairment loss/ reversal of impairment loss will be recognised. 3. On 1 July 20x6, Silver Co transferred the following inventory to P Co: Transfer price $80,000 Original cost (book value) $90,000 Forty percent of the inventory was unsold as at 31 December 20x6. Silver Co 4. On 1 July 20x5, P Co transferred fixed assets to Amber Co at a transfer price of $500,000. The original cost of the fixed asset was $520,000 while the net book value was $420,000. The original useful life was five years. The remaining useful life as at 1 July 20x5 was four years. 5. Silver Co provided construction services to P Co in relation to the construction of an office building of P Co. Applying the requirements of FRS 18 Revenue, Silver Co used the percentage of completion method to recognize income. P Co capitalized the progress billings in its capital work-in-progress pending the completion of its building. P completed the construction of the building on 1 October 20x6 and depreciated the building over a 20 year period from 1 October 20x6. The project fee information was as follows: 31 Dec 20x5 31 Dec 20x6 600,000 800,000 Construction revenue for year Construction costs for year Construction profit for year (400,000) (700,000) 200,000 100,000 Progress billings to date 500,000 1,400,000 The project account was kept open until the end of the warranty period on 1 October 20x7. 6. In conjunction with the same building project, P Co engaged Amber Co to act as a sub- contractor on the piling works. Amber Co completed the project on 30 June 20x5. Details are as follows: Sub-contractors' annual construction revenue of Amber Co earned from P Co 31 December 20x5 Construction revenue $500,000 Construction costs ($400,000) $100,000 Construction profit 7. During 20x5, Amber Co sold excess building materials (inventory) to P Co as follows: Transfer price $50,000 $40,000 Original cost (book value) P Co used the materials in the construction of the building that was completed on 1 October 20x6. 8. All intercompany balances were settled before the year-end. Assume that all companies reviewed assets for impairment losses at the financial year-end. 9. Tax rate is 20%. Assume that fair value over book value differentials will lead to future taxable income. Required (a) Prepare equity accounting entries for Amber Co for the year ended 31 December 20x6, with narratives (brief headers) and workings in accordance with IAS 28 Investments in Associates. (23 marks) (b) Calculate the balance in Investment in Amber Co as at 31 December 20x6, showing the workings clearly. (11 marks) (c) Prepare consolidation entries relevant to Silver Co for the year ended 31 December 20x6, with narratives (brief headers) and workings in accordance with IFRS 3 (2009) and IFRS 10 (2011). (50 marks) (d) Calculate the balance of non-controlling interests in Silver Co as at 31 December 20x6, showing the workings clearly. (9 marks) (e) Calculate the balance of consolidated retained earnings as at 31 December 20x6, showing the workings clearly. (7 marks)