P6.10 Comprehensive problem set 0 The financial statements of P CO, Y Co, and Z Co are shown below. . BE 0 00,00! 2 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 $4,200,000 (840,000) $3,360,000 (400,000) $2,960,000 1,200,000 $4,160,000 Y Coz Co $1,800,000 $ 600,000 (360,000) (132,000) $1,440,000 $ 468,000 (300,000) (100,000) $1,140,000 $ 368,000 1,200,000 700,000 $2,340,000 $1,068,000 Statement of Financial Position As at 31 December 20x6 P Co $2,800,000 2,200,000 800,000 760,000 Y CO $2,200,000 Z Co $ 700,000 230,000 Freed assets, net book value. Investment in Y Co, at cost Investment in Z Co, at cost. Inventory.... Intercompany receivable... Amount due from Z Co.. Accounts receivable... Cash.. 500,000 100,000 60,000 600,000 45,000 $7,265,000 700,000 100,000 $3,600,000 400,000 50,000 $1,380,000 $1,805,000 $ 460,000 $ 52,000 60,000 Accounts payable.. Amount due to P Co Intercompany payable.. Share capital Retained earnings. 100,000 1.200,000 4,160,000 $7,265,000 800,000 2,340,000 $3,600,000 200,000 1,068,000 $1,380,000 Pacquired an interest in Y Co and Z Co as follows: Z CO Y CO 1 January 20x4 90% January 20x5 30% Date of acquisition ..... Percentage acquired by P Co....... Shareholders' equity at date of acquisition: Share capital...... Retained earnings... $ 800,000 900,000 $1,700,000 $200,000 400,000 $600,000 ne differences between fair values and book values at the date of acquisition were as follows: Y CO Book value of inventory. Fair value of inventory.. The inventory was sold to third parties in 20x4. $220,000 $320,000 The for value of non-contre ve of non-controlling interests as at the date of acquisition was $190,000. udha Z CO Unrecorded contingen The contingent liability ma income statement of ....... $(100,000) a contingent liability that was reliably measured......... nability materialized in 20x6; Z Co recorded an expense to the ment of $100,000 for the year ended 31 December 20x6. Additional information: (a) On 1 January 20x5, Y Co transferred machinery to P Co at an invoiced price of $162 cost of the machinery was $180,000. The accumulated depreciation as at 1 January 2 The equipment was purchased on 1 January 20x4 when the estimated useful life Estimated useful life at the date of transfer was four-and-a-half years. Assume a zero (b) In 20x6, P Co sold excess inventory to Y Co as follows: ce of $162,000. The original January 20x5 was $36,000 ful life was five years. me a zero residual value Transfer price of inventory.............................. Original cost of inventory.. Percentage in inventory as at 31 December 20x6....... $50,000 $60,000 10% 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: Transfer price of inventory.............. Original cost of the inventory........... $100,000 59 ban $70,000 Percentage resold to third parties during: 20x5..... 20x6.... 20x7....... 20% 60% 20% (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 associale as at 31 December 20x6, showing the workings clearly. 3. Prepare consolidation worksheets for the year ended 31 December 20x6. P6.10 Comprehensive problem set 0 The financial statements of P CO, Y Co, and Z Co are shown below. . BE 0 00,00! 2 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 $4,200,000 (840,000) $3,360,000 (400,000) $2,960,000 1,200,000 $4,160,000 Y Coz Co $1,800,000 $ 600,000 (360,000) (132,000) $1,440,000 $ 468,000 (300,000) (100,000) $1,140,000 $ 368,000 1,200,000 700,000 $2,340,000 $1,068,000 Statement of Financial Position As at 31 December 20x6 P Co $2,800,000 2,200,000 800,000 760,000 Y CO $2,200,000 Z Co $ 700,000 230,000 Freed assets, net book value. Investment in Y Co, at cost Investment in Z Co, at cost. Inventory.... Intercompany receivable... Amount due from Z Co.. Accounts receivable... Cash.. 500,000 100,000 60,000 600,000 45,000 $7,265,000 700,000 100,000 $3,600,000 400,000 50,000 $1,380,000 $1,805,000 $ 460,000 $ 52,000 60,000 Accounts payable.. Amount due to P Co Intercompany payable.. Share capital Retained earnings. 100,000 1.200,000 4,160,000 $7,265,000 800,000 2,340,000 $3,600,000 200,000 1,068,000 $1,380,000 Pacquired an interest in Y Co and Z Co as follows: Z CO Y CO 1 January 20x4 90% January 20x5 30% Date of acquisition ..... Percentage acquired by P Co....... Shareholders' equity at date of acquisition: Share capital...... Retained earnings... $ 800,000 900,000 $1,700,000 $200,000 400,000 $600,000 ne differences between fair values and book values at the date of acquisition were as follows: Y CO Book value of inventory. Fair value of inventory.. The inventory was sold to third parties in 20x4. $220,000 $320,000 The for value of non-contre ve of non-controlling interests as at the date of acquisition was $190,000. udha Z CO Unrecorded contingen The contingent liability ma income statement of ....... $(100,000) a contingent liability that was reliably measured......... nability materialized in 20x6; Z Co recorded an expense to the ment of $100,000 for the year ended 31 December 20x6. Additional information: (a) On 1 January 20x5, Y Co transferred machinery to P Co at an invoiced price of $162 cost of the machinery was $180,000. The accumulated depreciation as at 1 January 2 The equipment was purchased on 1 January 20x4 when the estimated useful life Estimated useful life at the date of transfer was four-and-a-half years. Assume a zero (b) In 20x6, P Co sold excess inventory to Y Co as follows: ce of $162,000. The original January 20x5 was $36,000 ful life was five years. me a zero residual value Transfer price of inventory.............................. Original cost of inventory.. Percentage in inventory as at 31 December 20x6....... $50,000 $60,000 10% 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: Transfer price of inventory.............. Original cost of the inventory........... $100,000 59 ban $70,000 Percentage resold to third parties during: 20x5..... 20x6.... 20x7....... 20% 60% 20% (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 associale as at 31 December 20x6, showing the workings clearly. 3. Prepare consolidation worksheets for the year ended 31 December 20x6