The financial statements of P Co and Y Co for the year ended 31 December 20x5 are shown below. P Co acquired a 90% interest in Y Co on 1 January 20x3.

Additional information:

(a) Undervalued inventory of Y Co was sold to third parties in 20x4.

(b) Y Co transferred its fixed asset to P Co on 1 January 20x5. Details are as follows:

(c) Assume a tax rate of 20%. Tax effects should be recognized.

Required:
1. Prepare the consolidation adjustments for the year ended 31 December 20x5.
2. Perform an analytical check on non-controlling interests’ balance as at 31 December 20x5.
3. If P Co measures non-controlling interests as a proportion of identifiable net assets as at acquisition date, prepare the consolidation adjustment(s) that differs from 1, and perform an analytical check on non-controlling interests’ balance as at 31 December 20x5.
4. Perform an analytical check on consolidated retained earnings as at 31 December 20x5.

Transcribed Image Text:

Income Statement and Partial Statement of Changes in Equity For the Year Ended 31 December 20x5 Profit before tax (including dividend income). Tax..... Profit after tax. Dividends declared. Profit retained...... Retained earnings, 1 January 20x5. Retained earings, 31 December 20x5 Y Co $ 900,000 (180,000) $ 720,000 (300,000) (140,000) $1,700,000 $ 580,000 900,000 800,000 $2,600,000 $1,380,000 P Co $2,500,000 (500,000) $2,000,000