P6.11 Comprehensive problem set P Co acquired Y Co and Z Co as follows: Y CO z Co 1 January 20x4 90% 1 January 20x5 30% Date of acquisition ........... Percentage acquired by P Co.. Shareholders' equity at date of acquisition: Share capital ......... Retained earnings......... $ 500,000 600,000 $1,100,000 $300,000 400,000 $700,000 ences between fair value and book value of assets relate to the following: The differences betw Y CO Book value $150,000 Book value Folt value Fair value $100,000 . Accounts receivable.. Inventory.. $200,000 $250,000 additional provision for impairment ference between the fair value and book value of accounts receivable of Y Co was due to the Covision for impairment losses required as at the date of acquisition. Y Co recognized the ant losses in its separate financial statements only in 20x4. fair value of non-controlling interests in Y Co at the date of acquisition was $120,000. alued inventory of Z Co was sold to third parties in 20x5. The financial statements of P Co. imamente losses in its separatament losses Y Co and Z Co are shown below. Income Statement For Year Ended 31 December 20x6 P CO Y CO Z Co Profit before tax... $2,500,000 $ 900,000 $ 700,000 Tax.. (500,000) (180,000) (100,000) Profit after tax... $2,000,000 $ 720,000 $ 600,000 Dividends declared. (300,000) (140,000) (80,000) Profit retained. $1,700,000 $ 580,000 $ 520,000 Retained earnings, 1 January 20x6. 900,000 800,000 500,000 Retained earnings, 31 December 20x6.. $2,600,000 $1,380,000 $1,020,000 TOTO Statement of Financial Position As at 31 December 20x6 Y CO $1,250,000 Z Co $1,000,000 P CO $2,500,000 1,200,000 300,000 Fixed assets, net book value.. Investment in Y Co, at cost Investment in Z Co, at cost. Intercompany receivable.... Amount due from Z Co.. hventory 40,000 kecounts receivable.... 30,000 750,000 420,000 50,000 $5,250,000 500,000 150,000 100,000 $2,040,000 200,000 300,000 50,000 $1,550,000 Accounts payable.. Intercompany payable Imount due to P CO $ 160,000 $ 200,000 $1,610,000 40,000 Shure capital.. Retained earnings ... 1,000,000 2,600,000 $5,250,000 500,000 1,380,000 $2,040,000 30,000 300,000 1,020,000 $1,550,000 Additional information: (a) P Co transferred excess inventory to Y Co as follows: Transfer price............ Original cost of inventory........ Date of transfer........... Percentage resold to third parties in 20x6......................... The loss on the transfer is not indicative of an impairment loss. $120,000 $150,000 1 July 20x6 70% 1.000. The original (b) On 1 January 20x6, Y Co transferred its fixed asset to P Co at a transfer price of $120,000. Th. cost of the fixed asset was $100,000; its accumulated depreciation at the date of transfer The original useful life of the fixed asset was five years, and its remaining useful life as a 20x6 was two years. The fixed asset had zero residual value. (c) Sale of inventory from P Co to Z Co is as follows: transfer was $60,000 ful life as at 1 January Transfer price........... Original cost of inventory.......... Date of sale ........ Percentage resold to third parties in 20x5 ....... Percentage resold to third parties in 20x6....... $100,000 $80,000 1 November 20x5 20% 80% (d) Assume a tax rate of 20%. Recognize tax effects on fair value adjustments. Required: 1. Prepare consolidation and equity accounting entries for the year ended 31 December 20x6, with narratives and workings. 2. Perform an analytical check on the balance in non-controlling interests and investment in associate as at 31 December 20x6, showing the workings clearly. 3. Perform an analytical check on consolidated retained earnings as at 31 December 20x6, showing workings clearly. 4. Prepare consolidation worksheets for the year ended 31 December 20x6. P6.11 Comprehensive problem set P Co acquired Y Co and Z Co as follows: Y CO z Co 1 January 20x4 90% 1 January 20x5 30% Date of acquisition ........... Percentage acquired by P Co.. Shareholders' equity at date of acquisition: Share capital ......... Retained earnings......... $ 500,000 600,000 $1,100,000 $300,000 400,000 $700,000 ences between fair value and book value of assets relate to the following: The differences betw Y CO Book value $150,000 Book value Folt value Fair value $100,000 . Accounts receivable.. Inventory.. $200,000 $250,000 additional provision for impairment ference between the fair value and book value of accounts receivable of Y Co was due to the Covision for impairment losses required as at the date of acquisition. Y Co recognized the ant losses in its separate financial statements only in 20x4. fair value of non-controlling interests in Y Co at the date of acquisition was $120,000. alued inventory of Z Co was sold to third parties in 20x5. The financial statements of P Co. imamente losses in its separatament losses Y Co and Z Co are shown below. Income Statement For Year Ended 31 December 20x6 P CO Y CO Z Co Profit before tax... $2,500,000 $ 900,000 $ 700,000 Tax.. (500,000) (180,000) (100,000) Profit after tax... $2,000,000 $ 720,000 $ 600,000 Dividends declared. (300,000) (140,000) (80,000) Profit retained. $1,700,000 $ 580,000 $ 520,000 Retained earnings, 1 January 20x6. 900,000 800,000 500,000 Retained earnings, 31 December 20x6.. $2,600,000 $1,380,000 $1,020,000 TOTO Statement of Financial Position As at 31 December 20x6 Y CO $1,250,000 Z Co $1,000,000 P CO $2,500,000 1,200,000 300,000 Fixed assets, net book value.. Investment in Y Co, at cost Investment in Z Co, at cost. Intercompany receivable.... Amount due from Z Co.. hventory 40,000 kecounts receivable.... 30,000 750,000 420,000 50,000 $5,250,000 500,000 150,000 100,000 $2,040,000 200,000 300,000 50,000 $1,550,000 Accounts payable.. Intercompany payable Imount due to P CO $ 160,000 $ 200,000 $1,610,000 40,000 Shure capital.. Retained earnings ... 1,000,000 2,600,000 $5,250,000 500,000 1,380,000 $2,040,000 30,000 300,000 1,020,000 $1,550,000 Additional information: (a) P Co transferred excess inventory to Y Co as follows: Transfer price............ Original cost of inventory........ Date of transfer........... Percentage resold to third parties in 20x6......................... The loss on the transfer is not indicative of an impairment loss. $120,000 $150,000 1 July 20x6 70% 1.000. The original (b) On 1 January 20x6, Y Co transferred its fixed asset to P Co at a transfer price of $120,000. Th. cost of the fixed asset was $100,000; its accumulated depreciation at the date of transfer The original useful life of the fixed asset was five years, and its remaining useful life as a 20x6 was two years. The fixed asset had zero residual value. (c) Sale of inventory from P Co to Z Co is as follows: transfer was $60,000 ful life as at 1 January Transfer price........... Original cost of inventory.......... Date of sale ........ Percentage resold to third parties in 20x5 ....... Percentage resold to third parties in 20x6....... $100,000 $80,000 1 November 20x5 20% 80% (d) Assume a tax rate of 20%. Recognize tax effects on fair value adjustments. Required: 1. Prepare consolidation and equity accounting entries for the year ended 31 December 20x6, with narratives and workings. 2. Perform an analytical check on the balance in non-controlling interests and investment in associate as at 31 December 20x6, showing the workings clearly. 3. Perform an analytical check on consolidated retained earnings as at 31 December 20x6, showing workings clearly. 4. Prepare consolidation worksheets for the year ended 31 December 20x6