Reference no: EM133131135
Question - On January 1, 2021, Day Co. acquired 75% interest in Night Co. for P216,000. On this date, the carrying amount of Night's net identifiable assets was P192,000, equal to fair value. Non-controlling interest was measured using the proportionate share method.
The financial statements of the entities on December 31, 2021 show the following information.
|
Day Co.
|
Night Co.
|
|
ASSETS
|
|
|
|
Investment in subsidiary (at cost)
|
216,000
|
-
|
|
Equipment - net
|
480,000
|
228,000
|
|
Other assets
|
240,000
|
54,000
|
|
TOTAL ASSETS
|
936,000
|
282,000
|
LIABILITIES AND EQUITY
|
Liabilities
|
84,000
|
30,000
|
|
Share capital
|
720,000
|
120,000
|
|
Retained earnings
|
132,000
|
132,000
|
|
Total equity
|
852,000
|
252,000
|
|
TOTAL LIABILITIES AND EQUITY
|
936,000
|
282,000
|
|
Day Co.
|
Night Co.
|
|
Revenues
|
360,000
|
96,000
|
|
Depreciation expense
|
(48,000)
|
(14,400)
|
|
Other expenses
|
(38,400)
|
(21,600)
|
|
Gain on sale of equipment
|
14,400
|
-
|
|
Profit of the year
|
288,000
|
60,000
|
Additional information:
No dividends were declared by either entity during 2021. There is also no impairment of goodwill.
However, on January 1, 2021, right after the business combination, Day Co. sold equipment with historical cost of P144,000 and accumulated depreciation of P86,400 to Night Co. for P72,000. Day Co. has been depreciating this equipment over a useful life of 10 years using the straight-line method. Night Co. decided to continue this accounting policy and depreciate the equipment over its remaining useful life of 4 years.
Required -
a. What is the carrying amount of the equipment sold by Day Co. to Night Co. in the consolidated financial statements?
b. How much is the consolidated 'Equipment-net'?
c. How much is the consolidated 'Depreciation expense'?
d. Prepare a draft of the December 31, 20X1 consolidated statements of financial position and consolidated statement of profit or loss.