P Ltd bought 80% of S Ltd’s equity shares on 1 January 2016. On thedate of the purchase of S Ltd's shares, among other things, S Ltd'sstatement of financial position contains the following:$Retained profit72,000Tangible non-current assetsCost288,000Fair value360,000On the date of acquisition (of S Ltd's shares) by P Ltd, S Ltd's assetswere not revalued to fair value.It is part of S Ltd's accounting policy to depreciate non-current assetson a straight-line basis for 10 years.The income statements of P Ltd and S Ltd for the year ended 31December 2020 are as follows:P LtdS Ltd$$Revenue240,000168,000Cost of sales144,00024,000Gross profit96,000144,000Expenses12,00014,400Depreciation and amortizationOperating profit24,00028,80060,000100,8009,60050,400Income tax2,400Net profit98,400Reserves (brought forward)Reserves (carried forward)240,000168,000290,400 266,400Note: P Ltd and S Ltd are considered to be in the same group for the purpose offinancial reporting. Required:Compile a consolidated statement of profit or loss for P Ltd's groupfor the year ended 31 December 2020. Please be reminded thatin the consolidated statement of profit or loss, you must clearlyconsider or include:the extra depreciation charge owing to any difference as regardsthe original costs of assets and their fair values;'non-controlling interest’ (NCI); andnet profit that is only attributable to the group (i.e. afterdeducting NCI).Note: reserves brought forward of S Ltd is determined to be $53,760b Explain what goodwill is in the context of HKFRS 3 and if therecognition of goodwill is generally considered a straightforwardmatter.

Consolidated income statement is a statement which presents the income, expenses, revenues of the…

Required: a Compile a consolidated statement of profit or loss for P Ltd's group for the year ended 31 December 2020. Please be reminded that in the consolidated statement of profit or loss, you must clearly consider or include: the extra depreciation charge owing to any difference as regards the original costs of assets and their fair values; 'non-controlling interest’ (NCI); and net profit that is only attributable to the group (i.e. after deducting NCI). Note: reserves brought forward of S Ltd is determined to be $53,760 b Explain what goodwill is in the context of HKFRS 3 and if the recognition of goodwill is generally considered a straightforward matter.

Required: a Compile a consolidated statement of profit or loss for P Ltd's group for the year ended 31 December 2020. Please be reminded that in the consolidated statement of profit or loss, you must clearly consider or include: the extra depreciation charge owing to any difference as regards the original costs of assets and their fair values; 'non-controlling interest’ (NCI); and net profit that is only attributable to the group (i.e. after deducting NCI). Note: reserves brought forward of S Ltd is determined to be $53,760 b Explain what goodwill is in the context of HKFRS 3 and if the recognition of goodwill is generally considered a straightforward matter.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

See similar textbooks

Similar questions

The investments of Steelers Inc. include a single investment: 33,100 shares of Bengals Inc. common stock purchased on September 12, 2016, for 13 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, 2016, balance sheet date, the share price declined to 11 per share. a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, 2016. b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements?
Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold 50,000 of the bonds for 96. Journalize entries to record the following: a. The initial acquisition of the bonds on May 1. b. The semiannual interest received on November 1. c. The sale of the bonds on November 1. d. The accrual of 1,000 interest on December 31, 2016.
Unicorn Ltd acquired 80% of the issued shares of Pegasus Ltd for $685,700 on 1 July 2020. The financial statements of Pegasus Ltd showed the following items of equity: Share capital $565,500 Retained earnings $247,400 At acquisition date all the identificable assets and liabilities of Pegasus Ltd were recorded at amounts equal to fair value except for the following: Carrying amount Fair value Land $395,900 $424,100 During the year end 30 June 2021, Pegasus Ltd recorded at profit of $84,800. The tax rate is 30%. Required: Show the acquisition analysis as at 1 July 2020 and prepare the consolidated worksheet entries at 30 June 2021 for Unicorn Ltd assuming that it adopts the partial goodwill method.
On June 30, 2016, Gab Company purchased 25% of the outstanding ordinary shares of IB Co. at a total cost of P2,100,000. The book value of IB Co.’s net assets on acquisition date was P7,200,000. For the following reasons, Gab was willing to pay more than book value for the IB Co. shares: IB Co. has depreciable assets with a current fair value of P180,000 more than their book value. These assets have a remaining useful life of 10 years. IB Co. owns a tract of land with a current fair value of P900,000 more than its carrying amount. All other identifiable tangible and intangible assets of IB Co. have current fair values that are equal to their carrying amounts. IB Co. reported net income of P1,620,000, earned evenly during the current year ended December 31, 2016. Also in the current year, it declared and paid cash dividends of P315,000 to its ordinary shareholders. Market value of IB Co.’s ordinary shares at December 31, 2016 is P9 million. Cabbage Company’s financial year-end is…
On June 30, 2016, Gab Company purchased 25% of the outstanding ordinary shares of IB Co. at a total cost of P2,100,000. The book value of IB Co.’s net assets on acquisition date was P7,200,000. For the following reasons, Gab was willing to pay more than book value for the IB Co. shares: IB Co. has depreciable assets with a current fair value of P180,000 more than their book value. These assets have a remaining useful life of 10 years. IB Co. owns a tract of land with a current fair value of P900,000 more than its carrying amount. All other identifiable tangible and intangible assets of IB Co. have current fair values that are equal to their carrying amounts. IB Co. reported net income of P1,620,000, earned evenly during the current year ended December 31, 2016. Also in the current year, it declared and paid cash dividends of P315,000 to its ordinary shareholders. Market value of IB Co.’s ordinary shares at December 31, 2016 is P9 million. Cabbage Company’s financial year-end is…
Galaxy corporation acquired 80% of the outstanding shares of united company on June 1, 2016 for P3,517,500. United Company's stockholder's equity components at the end of this year as follows: Ordinary shares, P100 par, P1,500,000, Share premium P675,000 and Retained earnings P1, 335,000. Noncontrolling interest is measured at fair value and the fair value is P705,000. The Assets of United were fairly valued, except for inventories, which are overstated by P66,000, and equipment, which was understated by P90,000. Remaining useful life of equipment is 4 year. Stockholder's equity of Galaxy on January 1, 2016 is composed of Ordinary shares P4,500,000, Share premium P1,050,000, Retained earnings P3,150,000. Goodwill, if any, should be written down by P85,350 at year-end. Net income for the first year of parent is P450,000 and the net income of subsidiary from the date of acquisition is P255,000. Dividends declared at the end of the year amounted to P100,000 and P80,000. During the year,…
On 1 July 2016, A Ltd acquired 80% of the issued shares of B Ltd for $190 000. At this date, the equity of B Ltd was: Share capital General reserve Retained earnings $ 100 000 50 000 60 000 At acquisition date . At 30 June 2018, the equity of B Ltd consisted of: Share capital General reserve Retained earnings $ 100 000 70 000 90 000 During the 2017–18 year B Ltd recorded a profit of $20 000. At 1 July 2016, the fair value of the non-controlling interest was $45 000 and A Ltd adopts the full goodwill method. Required: Prepare the acquisition analysis (without any consolidation entries) please answer complete and working note