On 2 January 20x4, P Co acquired controlling interest in 90% of Topaz Co through the following transfers to Y Co, the former owners of Topaz. P Co expects significant synergies from Topaz Co’s possible licensing rights expected in 20x5. Financing and other transactions are also shown below:

Additional information:

(a) 

(b) 

(c) The fair value of non-controlling interests of Topaz as at acquisition date was $188,000.

(d) The balance of other comprehensive income as at 1 January 20x6 was $67,000.

(e) Assume a tax rate of 20%.

Required:
1. Prepare the journal entries to record the investment in Topaz, transaction costs, financing transactions and other entries in P Co’s books on 2 January 20x4. Recognize unamortized discount separately for future settlements.
2. Record the following transactions in P Co’s books for the year ended 31 December 20x6:
i. Interest expense on long-term loan payable in 20x6;
ii. Settlement of loan payable on 31 December 20x6.
3. Explain briefly the reason for not recognizing the possible licensing right as an intangible asset as at 2 January 20x4.
4. Prepare consolidation entries for the year ended 31 December 20x6, with narratives (brief headers) and workings in accordance with IFRS 3 and IFRS 10.
5. Perform an analytical check on the balance of non-controlling interests as at 31 December 20x6, showing the workings clearly.

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(1) Number of P Co shares issued to Y Co.. Fair value per share of P Co... (2) Direct cost of issuing P Co shares. (3) Due diligence costs paid to consultants. (4) Cash transferred to Y Co... (5) Borrowings from bank to finance acquisition. (6) Liability due to Y Co, payable end of 3 years. Payment due date.... Interest factor... 600,000 $1.80 $20,000 $25,000 $800,000 $670,000 $1,000,000 31 Dec 20x6 5% p.a.