P Co obtained control of Y Co on 1 January 20x4 by acquiring a 90% interest in Y Co. Share capital of Y Co was $900,000 and its retained earnings at date of acquisition was $300,000. Fair value of non-controlling interests of Y Co on 1 January 20x4 was $120,000.
Due diligence carried out before acquisition revealed that Y Co was a defendant in a litigation case in which a judgement was made in favor of the plaintiff. As Y Co is countersuing the plaintiff, no provision had yet been recognized as at 1 January 20x4 as the loss was not deemed probable. Based on expected losses, a provision of $200,000 should be recognized by P Co in accordance with IFRS 3. Y Co recognized a litigation expense of $180,000 in July 20x5 on the final award of damages to the plaintiff by the courts.

Required:
1. Prepare consolidation entries for the year ended 31 December 20x6.
2. Perform an analytical check on the balance in non-controlling interests as at 31 December 20x6, showing the workings clearly.

Transcribed Image Text:

The financial statements of P Co and Y Co for the current year ended 31 December 20x6 are shown below. Income Statement and partial Statement of Changes in Equity for year ended 31 December 20x6 Profit before tax. Tax... Profit after tax. Dividends declared. Profit retained.. Retained earnings, 1 Jan 20x6. Retained earnings, 31 Dec 20x6. P Co Y Co $5,000,000 $2,000,000 (1,000,000) (400,000) $4,000,000 $1,600,000 (300,000) (120,000) $3,700,000 $1,480,000 1,200,000 800,000 $4,900,000 $2,280,000 Statement of Financial Position as at 31 December 20x6 P Co Fixed assets, net book value.. Investment in Y co, at cost. Y Co $4,160,000 $2,500,000 1,800,000