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 | 4,400 | 3,000 |
Land & buildings | 456 | 345 |
Investment in P | 3,850 | |
Current Assets | ||
Inventory | 50 | 30 |
Receivables | 50 | 30 |
Bank | 40 | 32 |
140 | 92 | |
Total Assets | 8,846 | 3,437 |
Equity | ||
$1 ordinary shares | 1,300 | 1,100 |
Reserves | 7,496 | 2,307 |
Payables | 50 | 30 |
Total equity and liabilities | 8,846 | 3,437 |
The following information is also available.
a. S purchased 880 million shares in P some years ago, when P had a credit balance of $28 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 $24 million.
d. At 31 December 2014 P owes S $36 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
=$3,850 + $1,665 -$1,100 -$28 - $80
=$4,307
CONSOLIDATED FINANCIAL POSITION
S | P | CONSO | REMARKS | |
Plant | 4,400 | 3,000 | 7,400 | |
Land & buildings | 456 | 345 | 881 | 80 |
Investment in P | 3,850 | Delete | ||
Goodwill | 4,307 | Working | ||
Current Assets | ||||
Inventory | 50 | 30 | 56 | (24) |
Receivables | 50 | 30 | 44 | (36 ) |
Bank | 40 | 32 | 72 | |
140 | 92 | 172 | ||
Total Assets | 8,846 | 3,437 | 12,760 | |
Equity | ||||
$1 ordinary shares | 1,300 | 1,100 | 1,300 | Delete P |
Reserves | 7,496 | 2,307 | 9,295 | Working |
NCI | 2,121 | Working | ||
Payables | 50 | 30 | 44 | (36) |
Total equity and liabilities | 8,846 | 3,437 | 12,760 |
Working:
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P
=1,665 + 456
=$2,121
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)
=7,496 +1,823-24
=$9,295
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