The financial statements of A Co are shown below. P Co acquired a 30% interest in A Co on 1 January 20x3.

Additional information

(a) Unrecognized intangible asset of A Co was partially impaired in 20x4 to the extent of 50% of its original fair value.

(b) A Co purchased inventory from P Co on 1 December 20x4. Details are as follows:

The inventory was sold only in 20x5.

(c) Assume a tax rate of 20%. Recognize tax on fair value adjustments.

Required
1. Prepare the equity accounting entries for 20x5.
2. Perform an analytical check on the balance of Investment in A Co as at 31 December 20x5.

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Profit before tax. Tax at 20%..... Income Statement For Year Ended 31 December 20x5 Profit after tax.... Dividends declared. Profit retained.... Retained earnings, 1 January 20x5....... Retained earnings, 31 December 20x5. www $200,000 (40,000) $160,000 (20,000) $140,000 100,000 $240,000