P5.6 Consolidation and analytical check on non-controlling interests On 1 January 20x3, P Co acquired 90% ownership
Question:
P5.6 Consolidation and analytical check on non-controlling interests
On 1 January 20x3, P Co acquired 90% ownership interest of Y Co for $2,000,000. At that date, the following relate to Y Co:
Book value of net assets on 1 January 20x3...........................$1,500,000
Excess of fair value over book value of intellectual property...$ 100,000
It was estimated that the intellectual property had a remaining useful life of five years from 1 January 20x3. The fair value of non-controlling interests of Y Co as at the date of acquisition was $200,000. There was no changed in the share capital of Y Co since the acquisition date. There were no other items in equity other than share capital and retained earnings.
On 1 July 20x4, Y Co transferred its equipment to P Co at a transfer price of $120,000. The equipment was purchased from external vendors on 1 July 20x1 at a price of $140,000. Its estimated useful life was five years from the date of purchase and it had no residual value. The original estimates remained unchanged at the date of transfer.
Y Co sold inventory on the following dates:
Date of Transfer | 1 October 20x4 | 1 June 20x5 |
---|---|---|
Invoice Price | $150,000 | $350,000 |
Original cost | 100,000 | 400,000 |
In P's warehouse at end 20x4 | 40% of original batch | |
In P's warehouse at end 20x5 | 10% of original batch | 30% of original batch |
Losses on transfers are indicative of impairment loss in the underlying asset. Tax rate was 20%. Tax effects are to be recognised.
Extracts of Y Co's Financial Statements for the Year ended 31 December 20x5 are shown below:
Required:
1. Prepare the necessary consolidation adjustments for the year ended December 20x5
2. Perform an analytical check on non-controlling interests 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 part 1, and perform an analytical check on non-controlling interests' balance as at 31 December 20x5