Parent company cost model entry only a single entry

Parent Company Cost Model Entry
Only a single entry is recorded by the P in 20x5 in relation to its subsidiary
investment:
January 1, 20x5 – December 31, 20x5:
Cash……………………… 38,400
Dividend income (P48,000 x 80%)
…………….
38,400
Record dividends from S Company.
Consolidation Workpaper – Second Year after Acquisition
The working paper eliminations (in journal entry format) on December 31,
20x5, are as follows:
(E1) Investment in S
Company…………………………
19,200
Retained earnings – P
Company………………………
19,200
To provide entry to convert from the cost
method to the equity
method or the entry to establish
reciprocity at the beginning of the
year, 1/1/20x5, computed as follows:
Retained earnings – S
Company, 1/1/20x5
P144,00
0
Retained earnings – S
Company, 1/1/20x4
120,000
Increase in retained P 24,000

earnings……..
Multiplied by: Controlling
interest %
80%
Retroactive adjustment P
19,200
(E2) Common stock – S
Co…………………………………………
240,000
Retained earnings – S Co., 1/1/20x5 144,000
Investment in S Co (P384,000 x 80%)
…………………………
307,200
Non-controlling interest (P384,000 x
20%)………………………..
76,800
To eliminate intercompany investment
and equity accounts
of subsidiary and to establish non-
controlling interest (in net assets of
subsidiary) on January 1, 20x5.
(E3)
Inventory……………………………………………
…………………….
6,000
Accumulated depreciation –
equipment………………..
96,00
0
Accumulated depreciation –
buildings…………………..
192,0
00
Land……………………………………………
………………………….
7,200
Discount on bonds
payable………………………………………….
4,800
Goodwill…………………………………………
……………………….
12,00
0
Buildings……………………………………
…..
216,0
00
Non-controlling interest (P90,000 x 20%) 18,00
0

Investment in S
Co……………………………………………….
84,00
0
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 January 1, 20x5.
(E4) Retained earnings – P Company, 1/1/20x5
[(P13,200 x 80%) + P3,000, impairment loss
on
partial-goodwill]
13,56
0
Non-controlling interests (P13,200 x 20%)
…………………….
2,640
Depreciation expense……………………….. 6,000
Accumulated depreciation –
buildings…………………..
12,00
0
Interest expense………………………………… 1,200
Inventory……………………………………
……………………..
6,000
Accumulated depreciation –
equipment………………..
24,00
0
Discount on bonds
payable…………………………
2,400
Goodwill…………………………………… 3,000
To provide for years 20x4 and 20x5
depreciation and amortization on
differences between acquisition date fair value
and book value of
S’s identifiable assets and liabilities as follows:
Year 20x4 amounts are debited to P’s
retained earnings &
NCI;
Year 20x5 amounts are debited to respective
nominal accounts.

(20x4)
Retain
ed
earnin
gs,