P 15000 A summary or depreciation and amortization adjustments is as follows

P 15000 a summary or depreciation and amortization

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………………………………………………... P 15,000 A summary or depreciation and amortization adjustments is as follows: Account Adjustments to be amortized Over/ under Lif e Annual Amount Current Year(20x4) 20x5 Inventory P 1 P P 6,000 P -
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6,000 6,000 Subject to Annual Amortization Equipment (net) ......... 96,000 8 12,000 12,000 12,000 Buildings (net) (24,000 ) 4 ( 6,000) ( 6,000) (6,000) Bonds payable… 4,800 4 1,200 1,200 1,200 P 13,200 P 13,200 P 7,200 20x4: First Year after Acquisition Parent Company Cost Model Entry January 1, 20x4: (1) Investment in S Company…………………………………………… 372,000 Cash…………………………………………………………… ……….. 372,000 Acquisition of S Company. January 1, 20x4 – December 31, 20x4: (2) Cash……………………… 28,800 Dividend income (P36,000 x 80%)……………. 28,800 Record dividends from S Company. On the books of S Company, the P36,000 dividend paid was recorded as follows: Dividends paid………… 36,000 Cash……. 36,000 Dividends paid by S Co.. No entries are made on the parent’s books to depreciate, amortize or write-off the portion of the allocated excess that expires during 20x4. Consolidation Workpaper – First Year after Acquisition (E1) Common stock S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120.000 Investment in S Co…………………………………………… 288,000 Non-controlling interest (P360,000 x 20%) ……………………….. 72,000 To eliminate intercompany investment and equity accounts of subsidiary on date of acquisition; and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition. (E2) Inventory………………………………………………………… ………. 6,000 Accumulated depreciation – equipment……………….. 96,000 Accumulated depreciation – buildings………………….. 192,000 Land………………………………………………………… ……………. 7,200 Discount on bonds 4,800
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payable…………………………………………. Goodwill…………………………………………………… ……………. 15,000 Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000, partial goodwill)]………… 21,000 Investment in S Co………………………………………………. 84,000 To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition. Since the set-up entry in (E2) NCI at fair value, non-controlling interests have a share of entity goodwill and hence is exposed to impairment loss on goodwill. PAS 36 requires the impairment loss to be pro-rated between the parent and NCI on the same basis as that on which profit or loss is allocated. In other words, the impairment loss is not pro-rated in accordance with the proportion of goodwill recognized by parent and NCI.
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