Name: Ortega, Jacqueline L.

Course & Year: BS Accountancy 3

MODULE 3
BASIC CONSOLIDATION PROCEDURES

PROBLEM 1: TRUE OR FALSE

FALSE 1. The basis for consolidation is power.

2. Entity A acquires Entity B on November 1, 2020. The 2020 consolidated profit includes
Entity B's profit from January 1 to December 31, 2020 - it is as if control had existed for
FALSE the entire year.
FALSE 3. Goodwill is remeasured to fair value at each reporting date.

Use the following information for the next two items:

Entity A acquired 90% interest in Entity B on January 1, 2020 when Entity B's net assets had a fair
value of P100. On December 31, 2021. Entity B's net assets increased to P200 after adjustments for
acquisition - date fair value, net of depreciation.

TRUE 4. The NCI on December 31, 2021 is P20.

5. Before consolidation, Entity A’s retained earnings balance is P1,000. The consolidated
TRUE retained earnings P1,090.
6. NCI in the net assets of a subsidiary is presented in the consolidated financial
FALSE statements as a mezzanine item.
7. Goodwill is attributed both to the owners of the parent and non - controlling interests
TRUE only if the non - controlling interest are measured at fair value.
8. The amount of goodwill attributed to non - controlling interest is included in the
TRUE measurement of non - controlling interests the subsidiary's net assets.

Use the following information for the next two items:

Day Co. owns 80% of Night Co. Day and Night reported profits P200 and P100, respectively, in
2020. There is no depreciation of fair value adjustment.

TRUE 9. The consolidated profit is P300.

TRUE 10. The profit attributable to the owners of Day Co. is P280.

STRAIGHT PROBLEMS

CONSOLIDATION AT ACQUISITION DATE:

1. Prepare the consolidated statement of financial position.

Health Group
Consolidated statement of financial position
As of January 1, 20x1

Cash (100,000 + 20,000) 120,000

Accounts receivable (120,000 + 20,000 FV) 140,000
Inventory (400,000 + 100,000) 500,000
Investment in subsidiary (eliminated) -
Prepaid assets (30,000 + 10,000) 40,000
Building, net (1,200,000 + 540,000 FV) 1,740,000
Goodwill* 140,000
Total assets 2,680,000
Accounts payable (70,000 + 90,000) 160,000
Share capital of Parent 1,000,000
Share premium of Parent 350,000
Retained earnings of Parent 990,000
NCI** 180,000
Total liabilities and equity 2,680,000

Consideration transferred 560,000

**Non-controlling interest in the acquiree (600,000(a) x 30%) 180,000
Previously held equity interest in the acquiree -
Total 740,000
Fair value of net identifiable assets acquired*** (600,000)
*Goodwill 140,000

Share capital 200,000

Share premium 50,000
Retained earnings 230,000
Net assets at carrying amount 480,000
Fair value adjustment (20K + 540K - 40K - 400K) 120,000
(a)
Fair value of net identifiable assets acquired 600,000

CONSOLIDATION SUBSEQUENT TO ACQUISITION DATE -'PROPORTIONATE

2. Prepare the December 31, 2020 consolidated financial statements.

Step 1: Analysis of subsidiary’s net assets

Floyd Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 480,000 568,000*
Fair value adjustment (FVA) 120,000** 88,000***
Net assets at fair value 600,000 656,000 56,000
*(200,000+50,000+318,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 100,000 110,000 10,000
Building, net 400,000 510,000 110,000
Totals 500,000 620,000 120,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory 10,000 N/A 10,000 -
Equipment 110,000 5 years 22,000 88,000
Totals 120,000 32,000 88,000

Step 2: Goodwill computation

Consideration transferred 560,000

Non-controlling interest in the acquiree (600,000 x 10%) 60,000
Previously held equity interest in the acquiree -
Total 620,000
Fair value of net identifiable assets acquired (600,000)
Goodwill 20,000

Step 3: Non-controlling interest in net assets

Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 656,000

Multiply by: NCI percentage 10%
Non-controlling interest in net assets – Dec. 31, 2020 65,600

Step 4: Consolidated retained earnings

Parent’s retained earnings-12/31/2020 1,260,000

Parent's share in the net change in subsidiary's net assets (1) 50,400
Consolidated retained earnings – Dec. 31, 2020 1,310,400

Net change in Floyd’s net assets (Step 1) 56,000

Multiply by: Pink’s interest in Floyd 90%
(1)
Pink’s share in the net change in Floyd’s net assets 50,400

Step 5: Consolidated profit or loss

Profits of Pink & Floyd (270K + 88K) 358,000

Depreciation of FVA (Step 1) (32,000)
Consolidated profit 326,000

Owners of parent NCI Consolidated

Parent's profit before FVA 270,000 N/A 270,000
Share in Floyd's profit before FVA(2) 79,200 8,800 88,000
Depreciation of FVA (3)
(28,800) (3,200) (32,000)
Totals 320,400 5,600 326,000
(2)
(88,000 x 90%=79,200); (88,000 x 10%=8,800)
(3)
(32,000 x 90%=28,000); (32,000 x 10%=3,200)

Pink Group
Consolidated statement of financial position
As of December 31, 2020

Cash (620,000 + 120,000) 740,000

Accounts receivable (170,000 + 100,000) 270,000
Inventory (200,000 + 80,000 + 0 FVA net, Step 1) 280,000
Prepaid assets (10,000 + 8,000) 18,000
Building, net (1,100,000 + 350,000 + 88,000 FVA net, Step 1) 1,538,000
Goodwill (Step 2) 20,000
TOTAL ASSETS 2,866,000

Accounts payable (50,000 + 90,000) 140,000

Total liabilities 140,000
Share capital 1,000,000
Share premium 350,000
Retained earnings (Step 4) 1,310,400
Owners of parent 2,660,400
Non-controlling interest (Step 3) 65,600
 Total equity 2,726,000
TOTAL LIABILITIES AND EQUITY 2,866,000

Pink Group
Statement of profit or loss
For the year ended December 31, 20x1

Sales (600,000 + 200,000) 800,000

Cost of goods sold (200K + 60K + 10K dep’n. of FVA on inventory) (270,000)
Gross profit 530,000
Depreciation expense (100K + 50K + 22K dep’n. of FVA on bldg.) (172,000)
Distribution costs (30,000 + 2,000) (32,000)
Profit for the year 326,000
Profit attributable to:
Owners of the parent (Step 5) 320,400
Non-controlling interests (Step 5) 5,600
326,000

CONSOLIDATION SUBSEQUENT TO ACQUISITION DATE –'FAIR VALUE

3. Prepare the December 31, 2020 consolidated financial statements.

Step 1: Analysis of subsidiary’s net assets

Floyd Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 480,000 568,000*
Fair value adjustment (FVA) 120,000** 88,000***
Net assets at fair value 600,000 656,000 56,000
*(200,000+50,000+318,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 100,000 110,000 10,000
Building, net 400,000 510,000 110,000
Totals 500,000 620,000 120,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory 10,000 N/A 10,000 -
Equipment 110,000 5 years 22,000 88,000
Totals 120,000 32,000 88,000

Step 2: Goodwill computation

Consideration transferred 560,000

Non-controlling interest in the acquiree (600,000 x 10%) 65,000
Previously held equity interest in the acquiree -
Total 625,000
Fair value of net identifiable assets acquired (600,000)
Goodwill 25,000
Step 3: Non-controlling interest in net assets
 Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 656,000
Multiply by: NCI percentage 10%
Total 65,600
Add: Goodwill attributable to NCI (Step 2) 5,000
Non-controlling interest in net assets – Dec. 31, 2020 70,600

Step 4: Consolidated retained earnings

Parent’s retained earnings-12/31/2020 1,260,000

Parent's share in the net change in subsidiary's net assets (1) 50,400
Consolidated retained earnings – Dec. 31, 2020 1,310,400

Net change in Floyd’s net assets (Step 1) 56,000

Multiply by: Pink’s interest in Floyd 90%
(1)
Pink’s share in the net change in Floyd’s net assets 50,400

Step 5: Consolidated profit or loss

Profits of Pink & Floyd (270K + 88K) 358,000

Depreciation of FVA (Step 1) (32,000)
Consolidated profit 326,000

Owners of parent NCI Consolidated

Parent's profit before FVA 270,000 N/A 270,000
Share in Floyd's profit before FVA(2) 79,200 8,800 88,000
Depreciation of FVA(3) (28,800) (3,200) (32,000)
Totals 320,400 5,600 326,000
(2)
(88,000 x 90%=79,200); (88,000 x 10%=8,800)
(3)
(32,000 x 90%=28,000); (32,000 x 10%=3,200)

Pink Group
Consolidated statement of financial position
As of December 31, 2020

Cash (620,000 + 120,000) 740,000

Accounts receivable (170,000 + 100,000) 270,000
Inventory (200,000 + 80,000 + 0 FVA net, Step 1) 280,000
Prepaid assets (10,000 + 8,000) 18,000
Building, net (1,100,000 + 350,000 + 88,000 FVA net, Step 1) 1,538,000
Goodwill (Step 2) 25,000
TOTAL ASSETS 2,871,000

Accounts payable (50,000 + 90,000) 140,000

Total liabilities 140,000
Share capital 1,000,000
Share premium 350,000
Retained earnings (Step 4) 1,310,400
Owners of parent 2,660,400
Non-controlling interest (Step 3) 70,600
Total equity 2,731,000
TOTAL LIABILITIES AND EQUITY 2,871,000
 Pink Group
Statement of profit or loss
For the year ended December 31, 20x1

Sales (600,000 + 200,000) 800,000

Cost of goods sold (200K + 60K + 10K dep’n. of FVA on inventory) (270,000)
Gross profit 530,000
Depreciation expense (100K + 50K + 22K dep’n. of FVA on bldg.) (172,000)
Distribution costs (30,000 + 2,000) (32,000)
Profit for the year 326,000
Profit attributable to:
Owners of the parent (Step 5) 320,400
Non-controlling interests (Step 5) 5,600
326,000

4. Prepare the consolidated statement of financial position on January 1, 2020.

Sunny Group
Consolidated statement of financial position
As of January 1, 2020

Cash (80,000 + 50,000) 130,000

Inventory (400,000 + 80,000 FV) 480,000
Land (600,000 + 250,000 FV) 850,000
Goodwill* 120,000
TOTAL ASSETS 1,580,000

Accounts payable (200,000 + 80,000) 280,000

Total liabilities 280,000
Share capital 1,000,000
Retained earnings 180,000
Owners of parent 1,180,000
Non-controlling interest 120,000
Total equity 1,300,000
TOTAL LIABILITIES AND EQUITY 1,580,000

Consideration transferred 300,000

Non-controlling interest in the acquiree (300,000 x 40%) 120,000
Previously held equity interest in the acquiree -
Total 420,000
Fair value of net identifiable assets acquired (300,000)
Goodwill 120,000

5. Prepare the consolidated statement of financial position.

 Hammer Group
Consolidated statement of financial position
As of January 1, 2020

Cash (160,000 + 10,000) 170,000

Accounts receivable (200,000 + 110,000) 310,000
Inventory (400,000 + 100,000 FV) 500,000
Building (1,000,000 + 400,000 FV) 1,400,000
Goodwill* 40,000
TOTAL ASSETS 2,420,000

Accounts payable (100,000 + 20,000) 120,000

Total liabilities 120,000
Share capital 1,000,000
Share premium 300,000
Retained earnings 880,000
Owners of parent 2,180,000
Non-controlling interest 120,000
Total equity 2,300,000
TOTAL LIABILITIES AND EQUITY 2,420,000

Consideration transferred 520,000

Non-controlling interest in the acquiree (300,000 x 40%) 120,000
Previously held equity interest in the acquiree -
Total 640,000
Fair value of net identifiable assets acquired(1) (600,000)
Goodwill 40,000
(1)
(200,000+100,000+180,000+20,000+100,000)

6. Prepare the December 31, 2020 consolidated financial statements.

Step 1: Analysis of subsidiary’s net assets

Walk Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 480,000 568,000*
Fair value adjustment (FVA) 120,000** 90,000***
Net assets at fair value 600,000 658,000 58,000
*(200,000+50,000+268,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 80,000 100,000 20,000
Building, net 300,000 400,000 100,000
Totals 380,000 500,000 120,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory 200,000 N/A 20,000 -
Equipment 100,000 10 years 10,000 90,000
Totals 120,000 32,000 90,000
Step 2: Goodwill computation

Consideration transferred 520,000

Non-controlling interest in the acquiree (600,000 x 20%) 120,000
Previously held equity interest in the acquiree -
Total 640,000
Fair value of net identifiable assets acquired (600,000)
Goodwill 40,000

Step 3: Non-controlling interest in net assets

Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 658,000

Multiply by: NCI percentage 20%
Non-controlling interest in net assets – Dec. 31, 2020 131,600

Step 4: Consolidated retained earnings

Parent’s retained earnings-12/31/2020 1,300,000

Parent's share in the net change in subsidiary's net assets (1) 46,400
Consolidated retained earnings – Dec. 31, 2020 1,346,400

Net change in Floyd’s net assets (Step 1) 58,000

Multiply by: Pink’s interest in Floyd 80%
(1)
Run’s share in the net change in Walk’s net assets 46,400

Step 5: Consolidated profit or loss

Profits of Run and Walk (420K + 88K) 508,000

Depreciation of FVA (Step 1) (30,000)
Consolidated profit 478,000

Owners of parent NCI Consolidated

Parent's profit before FVA 420,000 N/A 420,000
Share in Walk’s profit before FVA(2) 70,400 17,600 88,000
Depreciation of FVA(3) (24,000) (6,000) (30,000)
Totals 466,400 11,600 478,000
(2)
(88,000 x 80%=70,400); (88,000 x 20%=17,600)
(3)
(30,000 x 80%=24,000); (30,000 x 20%=6,000)

Run Group
Consolidated statement of financial position
As of December 31, 2020

Cash (750,000 + 258,000) 1,008,000

Accounts receivable (260,000 + 50,000) 310,000
Inventory (200,000 + 20,000 + 0 FVA net, Step 1) 220,000
Building, net (950,000 + 250,000 + 90,000 FVA net, Step 1) 1,290,000
Goodwill (Step 2) 40,000
TOTAL ASSETS 2,868,000

Accounts payable (80,000 + 10,000) 90,000

Total liabilities 90,000
 Share capital 1,000,000
Share premium 300,000
Retained earnings (Step 4) 1,346,400
Owners of parent 2,646,400
Non-controlling interest 131,600
Total equity 2,778,000
TOTAL LIABILITIES AND EQUITY 2,868,000

Run Group
Statement of profit or loss
For the year ended December 31, 2020

Sales (800,000 + 200,000) 1,000,000

Cost of goods sold (200K + 60K + 20K dep’n. of FVA on inventory) (280,000)
Gross profit 720,000
Depreciation expense (50K + 50K + 10K dep’n. of FVA on bldg.) (110,000)
Distribution costs (130,000 + 2,000) (132,000)
Profit for the year 478,000
Profit attributable to:
Owners of the parent (Step 5) 466,400
Non-controlling interests (Step 5) 11,600
478,000

7. Prepare the December 31, 2020 consolidated financial statements.

Step 1: Analysis of subsidiary’s net assets

Walk Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 480,000 568,000*
Fair value adjustment (FVA) 120,000** 90,000***
Net assets at fair value 600,000 658,000 58,000
*(200,000+50,000+268,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 80,000 100,000 20,000
Building, net 300,000 400,000 100,000
Totals 380,000 500,000 120,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory 200,000 N/A 20,000 -
Equipment 100,000 10 years 10,000 90,000
Totals 120,000 32,000 90,000

Step 2: Goodwill computation

Consideration transferred 520,000

Non-controlling interest in the acquiree (600,000 x 20%) 130,000
Previously held equity interest in the acquiree -
Total 650,000
Fair value of net identifiable assets acquired (600,000)
Goodwill 50,000

Step 3: Non-controlling interest in net assets

Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 658,000

Multiply by: NCI percentage 20%
Total 131,600
Add: Goodwill attributable to NCI (Step 2) 10,000
Non-controlling interest in net assets – Dec. 31, 2020 141,600

Step 4: Consolidated retained earnings

Parent’s retained earnings-12/31/2020 1,300,000

Parent's share in the net change in subsidiary's net assets (1) 46,400
Consolidated retained earnings – Dec. 31, 2020 1,346,400

Net change in Floyd’s net assets (Step 1) 58,000

Multiply by: Pink’s interest in Floyd 80%
(1)
Run’s share in the net change in Walk’s net assets 46,400

Step 5: Consolidated profit or loss

Profits of Run and Walk (420K + 88K) 508,000

Depreciation of FVA (Step 1) (30,000)
Consolidated profit 478,000

Owners of parent NCI Consolidated

Parent's profit before FVA 420,000 N/A 420,000
Share in Walk’s profit before FVA(2) 70,400 17,600 88,000
Depreciation of FVA(3) (24,000) (6,000) (30,000)
Totals 466,400 11,600 478,000
(2)
(88,000 x 80%=70,400); (88,000 x 20%=17,600)
(3)
(30,000 x 80%=24,000); (30,000 x 20%=6,000)

Run Group
Consolidated statement of financial position
As of December 31, 2020

Cash (750,000 + 258,000) 1,008,000

Accounts receivable (260,000 + 50,000) 310,000
Inventory (200,000 + 20,000 + 0 FVA net, Step 1) 220,000
Building, net (950,000 + 250,000 + 90,000 FVA net, Step 1) 1,290,000
Goodwill (Step 2) 40,000
TOTAL ASSETS 2,868,000

Accounts payable (80,000 + 10,000) 90,000

Total liabilities 90,000
Share capital 1,000,000
Share premium 300,000
Retained earnings (Step 4) 1,346,400
Owners of parent 2,646,400
 Non-controlling interest 141,600
Total equity 2,778,000
TOTAL LIABILITIES AND EQUITY 2,878,000

Run Group
Statement of profit or loss
For the year ended December 31, 2020

Sales (800,000 + 200,000) 1,000,000

Cost of goods sold (200K + 60K + 20K dep’n. of FVA on inventory) (280,000)
Gross profit 720,000
Depreciation expense (50K + 50K + 10K dep’n. of FVA on bldg.) (110,000)
Distribution costs (130,000 + 2,000) (132,000)
Profit for the year 478,000
Profit attributable to:
Owners of the parent (Step 5) 466,400
Non-controlling interests (Step 5) 11,600
478,000

8. Prepare the consolidated financial statements as at December 31, 2020.

Step 1: Analysis of subsidiary’s net assets

Axion Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 290,000 310,000*
Fair value adjustment (FVA) 10,000** 40,000***
Net assets at fair value 300,000 350,000 50,000
*(250,000+40,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 120,000 80,000 (40,000)
Building, net 200,000 250,000 50,000
Totals 320,000 330,000 10,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory (40,000) N/A (40,000) -
Equipment 50,000 5 years 10,000 40,000
Totals 10,000 (30,000) 40,000

Step 2: Goodwill computation

Consideration transferred 300,000

Non-controlling interest in the acquiree (300,000 x 40%) 120,000
Previously held equity interest in the acquiree -
Total 420,000
Fair value of net identifiable assets acquired (Step 1) (300,000)
Goodwill 120,000

Step 3: Non-controlling interest in net assets

 Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 350,000
Multiply by: NCI percentage 40%
Non-controlling interest in net assets – Dec. 31, 2020 140,000

Step 4: Consolidated retained earnings

Parent’s retained earnings-12/31/2020 243,000

Parent's share in the net change in subsidiary's net assets (1) 30,000
Consolidated retained earnings – Dec. 31, 2020 273,000

Net change in Axion’s net assets (Step 1) 50,000

Multiply by: Pink’s interest in Floyd 60%
(1)
Joy’s share in the net change in Axion’s net assets 30,000

Step 5: Consolidated profit or loss

Profits of Joy and Axion (63K +20K) 83,000

Depreciation of FVA (Step 1) 30,000
Consolidated profit 113,000

Owners of parent NCI Consolidated

Parent's profit before FVA 63,000 N/A 63,000
Share in Axion’s profit before FVA (2)
12,000 8,000 20,000
Depreciation of FVA(3) 18,000 12,000 30,000
Totals 93,000 20,000 113,000
(2)
(20,000 x 60%=12,000); (20,000 x 40%=8,000)
(3)
(30,000 x 60%=18,000); (30,000 x 40%=12,000)

Joy Group
Consolidated statement of financial position
As of December 31, 2020

Cash (143,000 + 60,000) 203,000

Inventory (440,000 + 160,000 + 0 FVA net, Step 1) 600,000
Building, net (560,000 + 160,000 + 40,000 FVA net, Step 1) 760,000
Goodwill (Step 2) 120,000
TOTAL ASSETS 1,683,000

Accounts payable (200,000 + 70,000) 270,000

Total liabilities 270,000
Share capital 1,000,000
Retained earnings (Step 4) 273,000
Owners of parent 1,273,000
Non-controlling interest 140,000
Total equity 1,413,000
TOTAL LIABILITIES AND EQUITY 1,683,000

Joy Group
Statement of profit or loss
For the year ended December 31, 20x1
 Sales (300,000 + 120,000) 420,000
Cost of goods sold (165K + 72K - 40K dep’n. of FVA on inventory) (197,000)
Gross profit 223,000
Depreciation expense (40K + 10K + 10K dep’n. of FVA on bldg.) (60,000)
Distribution costs (32,000 + 18,000) (50,000)
Profit for the year 113,000
Profit attributable to:
Owners of the parent (Step 5) 93,000
Non-controlling interests (Step 5) 20,000
113,000

9. Prepare the consolidated financial statements as at December 31, 2020.

Step 1: Analysis of subsidiary’s net assets

Axion Co. Jan 1, 2020 December 31, 2020 Net Change

Net assets at carrying amount 290,000 310,000*
Fair value adjustment (FVA) 10,000** 40,000***
Net assets at fair value 300,000 350,000 50,000
*(250,000+40,000)

**FVA at acquisition date

Carrying amount Fair value FVA
Inventory 120,000 80,000 (40,000)
Building, net 200,000 250,000 50,000
Totals 320,000 330,000 10,000

***FVA at acquisition date less subsequent depreciation

FVA, 1/1/2020 Useful life Depreciation FVA, 12/31/2020
Inventory (40,000) N/A (40,000) -
Equipment 50,000 5 years 10,000 40,000
Totals 10,000 (30,000) 40,000

Step 2: Goodwill computation

Consideration transferred 300,000

Non-controlling interest in the acquiree 132,000
Previously held equity interest in the acquiree -
Total 432,000
Fair value of net identifiable assets acquired (Step 1) (300,000)
Goodwill 132,000

Step 3: Non-controlling interest in net assets

Subsidiary’s net assets at fair value-12/31/2020 (Step 1) 350,000

Multiply by: NCI percentage 40%
Total 140,000
Add: Goodwill attributable to NCI (Step 2) 12,000
Non-controlling interest in net assets – Dec. 31, 2020 152,000

Step 4: Consolidated retained earnings

 Parent’s retained earnings-12/31/2020 243,000
Parent's share in the net change in subsidiary's net assets (1) 30,000
Consolidated retained earnings – Dec. 31, 2020 273,000

Net change in Axion’s net assets (Step 1) 50,000

Multiply by: Pink’s interest in Floyd 60%
(1)
Joy’s share in the net change in Axion’s net assets 30,000

Step 5: Consolidated profit or loss

Profits of Joy and Axion (63K +20K) 83,000

Depreciation of FVA (Step 1) 30,000
Consolidated profit 113,000

Owners of parent NCI Consolidated

Parent's profit before FVA 63,000 N/A 63,000
Share in Axion’s profit before FVA(2) 12,000 8,000 20,000
Depreciation of FVA(3) 18,000 12,000 30,000
Totals 93,000 20,000 113,000
(2)
(20,000 x 60%=12,000); (20,000 x 40%=8,000)
(3)
(30,000 x 60%=18,000); (30,000 x 40%=12,000)

Joy Group
Consolidated statement of financial position
As of December 31, 2020

Cash (143,000 + 60,000) 203,000

Inventory (440,000 + 160,000 + 0 FVA net, Step 1) 600,000
Building, net (560,000 + 160,000 + 40,000 FVA net, Step 1) 760,000
Goodwill (Step 2) 132,000
TOTAL ASSETS 1,695,000

Accounts payable (200,000 + 70,000) 270,000

Total liabilities 270,000
Share capital 1,000,000
Retained earnings (Step 4) 273,000
Owners of parent 1,273,000
Non-controlling interest 152,000
Total equity 1,425,000
TOTAL LIABILITIES AND EQUITY 1,695,000

Joy Group
Statement of profit or loss
For the year ended December 31, 20x1

Sales (300,000 + 120,000) 420,000

Cost of goods sold (165K + 72K - 40K dep’n. of FVA on inventory) (197,000)
Gross profit 223,000
Depreciation expense (40K + 10K + 10K dep’n. of FVA on bldg.) (60,000)
Distribution costs (32,000 + 18,000) (50,000)
Profit for the year 113,000
Profit attributable to:
Owners of the parent (Step 5) 93,000
Non-controlling interests (Step 5) 20,000
113,000