ACCA F3 Prepare Consolidated Financial Position 2

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	2,200	4,200
Land & buildings	3,192	2,760
Investment in P	2,750
Current Assets
Inventory	50	30
Receivables	50	30
Bank	120	96
	220	156
Total Assets	8,362	7,116
Equity
$1 ordinary shares	2,600	3,300
Reserves	5,412	3,606
Payables	350	210
Total equity and liabilities	8,362	7,116

The following information is also available.

a. S purchased 2,640 million shares in P some years ago, when P had a credit balance of $56 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 $90 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 $15 million.

d. At 31 December 2014 P owes S $48 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

=$2,750 + $1,665 -$3,300 -$56 - $90

=$969

CONSOLIDATED FINANCIAL POSITION

	S	P	CONSO	REMARKS
Plant	2,200	4,200	6,400
Land & buildings	3,192	2,760	6,042	90
Investment in P	2,750			Delete
Goodwill			969	Working
Current Assets
Inventory	50	30	65	(15)
Receivables	50	30	32	(48 )
Bank	120	96	216
	220	156	313
Total Assets	8,362	7,116	13,724
Equity
$1 ordinary shares	2,600	3,300	2,600	Delete P
Reserves	5,412	3,606	8,237	Working
NCI			2,375	Working
Payables	350	210	512	(48)
Total equity and liabilities	8,362	7,116	13,724

Working:

NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P

=1,665 + 710

=$2,375

CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)

=5,412 +2,840-15

=$8,237

To do the same topic again in ACCA F3 prepare consolidated financial position 2

To do another topic in ACCA F3