P is the parent company of N. The following are the statements of financial position for both companies as at 31 October 20X7.
P | N | |
Property plant and equipment | 370 | 4,560 |
Investment in N | 5,280 | |
Current Assets | ||
Inventory | 200 | 120 |
Receivables | 450 | 270 |
Bank | 1,000 | 800 |
1,650 | 1,190 | |
Total Assets | 7,300 | 5,750 |
Equity | ||
$1 ordinary shares | 5,000 | 4,000 |
Retained Earnings | 1,800 | 1,440 |
6,800 | 5,440 | |
Payables | 450 | 270 |
Tax | 50 | 40 |
Total equity and liabilities | 7,300 | 5,750 |
The following information is also available.
a. P purchased 70% of shares in N a year ago when N had retained earnings of $720. the fair value of the non-controlling interest at the date of acquisition was $1,440.
b. During the year P sold goods with an invoice value of $48 to N. These goods were invoiced at cost plus 20%. Half of the goods sold are still in N's inventory at the year end.
c. N owes P $14 at 31 October 20X7 for goods it purchased during the year.
Required.
a. Calculate the goodwill on acquisition.
b. Prepare the consolidated statement of financial position for the P group as at 31 October 20X7.
Suggested Solutions:
A. GOODWILL
=CONSIDERATION + NCI AT ACQUITSITION - SHARE OF N - PREACQUISITION RETAINED EARNINGS
=$5,280 + $1,440 -$4,000 -$720
=$2,000
CONSOLIDATED FINANCIAL POSITION
P | N | CONSO | REMARKS | |
Property plant and equipment | 370 | 4,560 | 4,930 | |
Investment in N | 5,280 | ADJ | ||
Goodwill | 2,000 | ADJ | ||
Current Assets | ||||
Inventory | 200 | 120 | 316 | ADJ |
Receivables | 450 | 270 | 706 | ADJ |
Bank | 1,000 | 800 | 1,800 | |
1,650 | 1,190 | 2,822 | ||
Total Assets | 7,300 | 5,750 | 9,752 | |
Equity | ||||
$1 ordinary shares | 5,000 | 4,000 | 5,000 | ADJ |
Retained Earnings | 1,800 | 1,440 | 2,300 | ADJ |
NCI | 1,656 | ADJ | ||
6,800 | 5,440 | 8,956 | ||
Payables | 450 | 270 | 706 | ADJ |
Tax | 50 | 40 | 90 | |
Total equity and liabilities | 7,300 | 5,750 | 9,752 |
Working:
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM N
=1,440 + 216
=$1,656
CONSO RETAINED EARNINGS =P'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM N - UNREALISED PROFIT (P)
=1,800 +504-4
=$2,300
UNREALISED PROFIT = SALES /1.2 X0.2 X0.5
=48 / 1.2 X 0.2 X 0.5
=$4
To do the same topic again in ACCA F3 prepare consolidated financial position
To do another topic in ACCA F3
2015 E-rainbowlight ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION