The financial statements of P Co, Y Co, and Z Co are shown below.

P acquired an interest in Y Co and Z Co as follows:

Additional information:

(a) On 1 January 20x5, Y Co transferred machinery to P Co at an invoiced price of $162,000. The original cost of the machinery was $180,000. The accumulated depreciation as at 1 January 20x5 was $36,000. The equipment was purchased on 1 January 20x4 when the estimated useful life was five years. Estimated useful life at the date of transfer was four-and-a-half years. Assume a zero residual value.

(b) In 20x6, P Co sold excess inventory to Y Co as follows:

The loss incurred by P Co was indicative of an impairment loss of the inventory.

(c) In 20x5, P Co sold inventory to Z Co as follows:

(d) Assume a tax rate of 20%. Recognize tax effects on fair value adjustments.

Required
1. Prepare consolidation and equity accounting entries for the year ended 31 December 20x6, with narratives and workings.
2. Perform an analytical check on the balance in non-controlling interests and investment in associate as at 31 December 20x6, showing the workings clearly.
3. Prepare consolidation worksheets for the year ended 31 December 20x6.

Transcribed Image Text:

Income Statement For Year Ended 31 December 20x6 Profit before tax. Tax... Profit after tax. Dividends declared. Profit retained... Retained earnings, 1 January 20x6. Retained earnings, 31 December 20x6. P Co Y Co Z Co $ 600,000 $4,200,000 $1,800,000 (840,000) (360,000) (132,000) $3,360,000 $1,440,000 $468,000 (400,000) (300,000) (100,000) $2,960,000 $1,140,000 $368,000 1,200,000 1,200,000 $4,160,000 $2,340,000 700,000 $1,068,000