How much is the consolidated Retained Earnings as of 12/31/2022?
On January 3, 2022, P Company acquired 70% interest in S Company for P4,200,000. Consideration
includes issuance of shares with fair value of P3,500,000 and cash for the balance. On this date, the equity
of S Company is as follows:
P. Company S Company
Ordinary Share Capital 3,300,000 1,450,000
Non-controlling interest is initially measured at fair value of P1,675,000. Fair value of the following assets
of S Company exceeded their book values: Inventories, P150,000; Fixed assets (remaining life – 5 years),
P600,000. All other assets and liabilities are fairly valued.
S Company sold an equipment to P Company for P200,000 carried in S’s book at P120,000 on July 1, 2022;
remaining life is 4 years. Towards the end of the year, P sold to S merchandise costing P150,000 at 40%
gross profit, 25% of these inventories was unsold as of balance sheet date. Also, P purchased inventory
from S amounting to P250,000 which includes mark-up of 20% based on cost. P sold to outsider 30% of
these inventories during 2022.
P Company reported income and declared dividend of P1,450,000 and P400,000, respectively. S Company
has income and dividend declared of P800,000 and P175,000, respectively.
Required
1. How much is the consolidated Retained Earnings as of 12/31/2022?
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