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 | 1,080 | 4,980 |
| Investment in N | 5,120 | |
| Current Assets | ||
| Inventory | 300 | 180 |
| Receivables | 150 | 90 |
| Bank | 400 | 320 |
| 850 | 590 | |
| Total Assets | 7,050 | 5,570 |
| Equity | ||
| $1 ordinary shares | 5,000 | 4,000 |
| Retained Earnings | 1,400 | 1,120 |
| 6,400 | 5,120 | |
| Payables | 350 | 210 |
| Tax | 300 | 240 |
| Total equity and liabilities | 7,050 | 5,570 |
The following information is also available.
a. P purchased 70% of shares in N a year ago when N had retained earnings of $560. 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 $60 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 $18 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
=$5,120 + $1,440 -$4,000 -$560
=$2,000
CONSOLIDATED FINANCIAL POSITION
| P | N | CONSO | REMARKS | |
| Property plant and equipment | 1,080 | 4,980 | 6,060 | |
| Investment in N | 5,120 | ADJ | ||
| Goodwill | 2,000 | ADJ | ||
| Current Assets | ||||
| Inventory | 300 | 180 | 475 | ADJ |
| Receivables | 150 | 90 | 222 | ADJ |
| Bank | 400 | 320 | 720 | |
| 850 | 590 | 1,417 | ||
| Total Assets | 7,050 | 5,570 | 9,477 | |
| Equity | ||||
| $1 ordinary shares | 5,000 | 4,000 | 5,000 | ADJ |
| Retained Earnings | 1,400 | 1,120 | 1,787 | ADJ |
| NCI | 1,608 | ADJ | ||
| 6,400 | 5,120 | 8,395 | ||
| Payables | 350 | 210 | 542 | ADJ |
| Tax | 300 | 240 | 540 | |
| Total equity and liabilities | 7,050 | 5,570 | 9,477 |
Working:
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM N
=1,440 + 168
=$1,608
CONSO RETAINED EARNINGS =P'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM N - UNREALISED PROFIT (P)
=1,400 +392-5
=$1,787
UNREALISED PROFIT = SALES /1.2 X0.2 X0.5
=60 / 1.2 X 0.2 X 0.5
=$5
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