The draft statements of financial position of S and its subsidiary company P at 31 December 2014 are as follows:
S | P | |
Million $ | Million $ | |
Plant | 1,100 | 600 |
Land & buildings | 3,192 | 1,725 |
Investment in P | 1,650 | |
Current Assets | ||
Inventory | 350 | 210 |
Receivables | 350 | 210 |
Bank | 160 | 128 |
860 | 548 | |
Total Assets | 6,802 | 2,873 |
Equity | ||
$1 ordinary shares | 3,900 | 1,100 |
Reserves | 2,752 | 1,683 |
Payables | 150 | 90 |
Total equity and liabilities | 6,802 | 2,873 |
The following information is also available.
a. S purchased 880 million shares in P some years ago, when P had a credit balance of $84 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $1,665.
b. At the date of the acquisition the freehold land of P was valued at $80 million in excess of its book value. The valuation was not recorded in the accounts of P.
c. P's inventory includes goods purchased from S at a price that includes a profit to S of $27 million.
d. At 31 December 2014 P owes S $72 million for goods purchased during the year.
Required.
a. Calculate the goodwill on acquisition.
b. Prepare the consolidated statement of financial position for S as at 31 December 2014.
Suggested Solutions:
A. GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF N - PREACQUISITION RESERVE -FAIR VALUE ADJUSTMENT
=$1,650 + $1,665 -$1,100 -$84 - $80
=$2,051
CONSOLIDATED FINANCIAL POSITION
S | P | CONSO | REMARKS | |
Plant | 1,100 | 600 | 1,700 | |
Land & buildings | 3,192 | 1,725 | 4,997 | 80 |
Investment in P | 1,650 | Delete | ||
Goodwill | 2,051 | Working | ||
Current Assets | ||||
Inventory | 350 | 210 | 533 | (27) |
Receivables | 350 | 210 | 488 | (72 ) |
Bank | 160 | 128 | 288 | |
860 | 548 | 1,309 | ||
Total Assets | 6,802 | 2,873 | 10,057 | |
Equity | ||||
$1 ordinary shares | 3,900 | 1,100 | 3,900 | Delete P |
Reserves | 2,752 | 1,683 | 4,004 | Working |
NCI | 1,985 | Working | ||
Payables | 150 | 90 | 168 | (72) |
Total equity and liabilities | 6,802 | 2,873 | 10,057 |
Working:
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P
=1,665 + 320
=$1,985
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)
=2,752 +1,279-27
=$4,004
To do the same topic again in ACCA F3 prepare consolidated financial position 2
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 2