P Co acquired interests in Silver Co and Amber Co. Their current financial statements are shown below. All figures are in $ unless as otherwise indicated.

Fair and book values of identifiable net assets of each company as at date of acquisition were as follows:

Additional information

(a) Remaining useful life of undervalued fixed assets of Silver Co as at 1 January 20x3 was 20 years. The useful life was changed to 10 years on 1 January 20x6. Residual value was negligible.

(b) On 1 July 20x5, Silver Co transferred inventory to Prism Co as follows:

Seventy percent of the inventory was unsold as at 31 December 20x5 and 20% of the original batch was unsold as at 31 December 20x6.

(c) From 1 July 20x5 to 30 June 20x6, Prism Co made a loan to Silver Co to finance the construction of an extension of a building of Silver Co. The interest on the loan was properly capitalized by Silver Co in accordance with IAS 23 Borrowing Costs. Prism obtained funding for the loan from an unrelated bank. Prism Co recognized interest income and interest expense as follows:

The construction was completed on 30 June 20x6.
The extension of the building had a useful life of 20 years from 1 July 20x6. The loans were repaid by Silver in full on 30 June 20x6.

(d) The intangible asset of Amber Co had an infinite useful life. Impairment reviews on the following dates show the recoverable amount of the asset as follows

(e) Amber Co sold inventory to Prism Co during 20x6 at transfer price of $145,000 when the carrying amount was $125,000. Subsequently:

(f) Assume a tax rate of 20%.
(g) Non-controlling interests are measured at full fair value at acquisition date.

Required
1. Prepare consolidation adjusting entries for the year ended 31 December 20x6, with narratives (brief headers) in accordance with IFRS 3 and IFRS 10.
2. Prepare equity accounting entries for the year ended 31 December 20x6, with narratives (brief headers) in accordance with IAS 28.
3. Perform an analytical check on the balance of non-controlling interests as at 31 December 20x6.
4. Perform an analytical check on the balance of the investment in associate account as at 31 December 20x6.

5. Perform an analytical check on the consolidated retained earnings as at 31 December 20x6.

Transcribed Image Text:

Income Statement and Partial Statement of Changes in Equity for the Year Ended 31 December 20x6 Profit before tax. Tax.. Profit after tax. Dividends declared. Retained profit.. Retained earnings, 1 Jan 20x6. Retained earnings, 31 Dec 20x6. Prism Co Silver Co Amber Co 1,250,000 1,200,000 1,450,000 (250,000) (240,000) (290,000) 1,000,000 960,000 1,160,000 (50,000) (68,000) (130,000) 950,000 892,000 1,030,000 540,000 520,000 490,000 1,490,000 1,412,000 1,520,000