S purchased 80% of C's equity on 1 January 2014 for $550 when Cat's retained earnings were $84. The fair value of the non-controlling interest on that date was $555. During the year, S sold goods which cost $360 to C, at an invoiced price of $468. Cat had 50% of the goods still in inventories at the year end. The two companies' draft financial statements are as follows:
PROFIT OR LOSS
S | C | |
$ '000 | $ '000 | |
Revenue | 10,400 | 9,180 |
Cost of sales | 6,240 | 3,672 |
Gross profit | 4,160 | 5,508 |
Other expeneses | 2,080 | 3,305 |
Net profit | 2,080 | 2,203 |
Income tax | 416 | 441 |
Profit for the year | 1,664 | 1,763 |
FINANCIAL POSITION
S | C | |
$ '000 | $ '000 | |
Investment in C | 550 | |
Tangible non-current assets | 3,300 | 1,200 |
Current Assets | ||
Inventory | 450 | 270 |
Receivables | 200 | 120 |
Bank | 100 | 80 |
750 | 470 | |
Total Assets | 4,600 | 1,670 |
Equity | ||
$1 ordinary shares | 1,250 | 150 |
Retained earnings | 3,005 | 1,285 |
Payables | 300 | 180 |
Tax | 45 | 55 |
Total equity and liabilities | 4,600 | 1,670 |
Prepare the draft consolidated statement of profit or loss and draft consolidated statement of financial position for the S group at 31 December 2014.
Suggested Solutions (CONSOLIDATED STATEMENT OF PROFIT OR LOSS)
Working:
Unrealised profit = 50% of (sales -cost)
=0.5 X (468 -360)
= 54
S | C | CONSO | REMARKS | |
$ '000 | $ '000 | $ '000 | ||
Revenue | 10,400 | 9,180 | 19,112 | (468) |
Cost of sales | 6,240 | 3,672 | 9,498 | Derived |
Gross profit | 4,160 | 5,508 | 9,614 | (54) |
Other expeneses | 2,080 | 3,305 | 5,385 | |
Net profit | 2,080 | 2,203 | 4,229 | |
Income tax | 416 | 441 | 857 | |
Profit for the year | 1,664 | 1,763 | 3,373 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
S | P | CONSO | REMARKS | |
Plant | 3,300 | 1,200 | 4,500 | |
Investment in P | 550 | Delete | ||
Goodwill | 871 | Working | ||
Current Assets | ||||
Inventory | 450 | 270 | 666 | (54) |
Receivables | 200 | 120 | 320 | |
Bank | 100 | 80 | 180 | |
750 | 470 | 1,166 | ||
Total Assets | 4,600 | 1,670 | 6,537 | |
Equity | ||||
$1 ordinary shares | 1,250 | 150 | 1,250 | Delete P |
Retained earnings | 3,005 | 1,285 | 3,912 | Working |
NCI | 795 | Working | ||
Payables | 300 | 180 | 480 | |
Tax | 45 | 55 | 100 | |
Total equity and liabilities | 4,600 | 1,670 | 6,537 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$550 + $555 -$150 -$84
=$871
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=555 + 240
=$795
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=3,005 +961-54
=$3,912
To do the same topic again in ACCA F3 prepare consolidated financial position 3
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 3