Parent Company Cost Model Entry Only a single entry is recorded by the P in

Parent company cost model entry only a single entry

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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
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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
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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.
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(20x4) Retain ed earnin gs,
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