P acquired S in two successive purchases resulting in control on 31 December 20x0. Details of the purchases and other information relating to S are shown below:

Book value of net identifiable assets of S was close to its fair value at each acquisition date. Extracts of S’s income statement for the period 1 July 20x0 to 31 December 20x0 are shown below:

Required
1. Prepare the journal entries in respect of the investment in P’s separate financial statements for the year ended 31 December 20x0.
2. Prepare the equity accounting and consolidation entries to be put through in P’s consolidated financial statements for the year ended 31 December 20x0.

Transcribed Image Text:

Date 1 July 20x0. 31 December 20x0 31 December 20x0 Share capital of S... Retained earnings of S Non-controlling interests of 5 as at 31 December 20x0..... Acquisition cost paid for incremental investment $ 5,000,000 7,000,000 $12,000,000 Fair value of S as an entity $16,000,000 17,500,000 10,000,000 5,000,000 $15,000,000 $5,250,000 Percentage acquired in incremental investment 30% 40% Cumulative percentage held by P 30% 70%