S purchased 80% of C's equity on 1 January 2014 for $4,950 when Cat's retained earnings were $84. The fair value of the non-controlling interest on that date was $185. During the year, S sold goods which cost $1,080 to C, at an invoiced price of $1,404. 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 | 6,500 | 6,120 |
| Cost of sales | 3,900 | 2,448 |
| Gross profit | 2,600 | 3,672 |
| Other expeneses | 1,300 | 2,203 |
| Net profit | 1,300 | 1,469 |
| Income tax | 260 | 294 |
| Profit for the year | 1,040 | 1,175 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 4,950 | |
| Tangible non-current assets | 1,100 | 5,400 |
| Current Assets | ||
| Inventory | 400 | 240 |
| Receivables | 350 | 210 |
| Bank | 100 | 80 |
| 850 | 530 | |
| Total Assets | 6,900 | 5,930 |
| Equity | ||
| $1 ordinary shares | 750 | 1,350 |
| Retained earnings | 5,585 | 4,155 |
| Payables | 250 | 150 |
| Tax | 315 | 275 |
| Total equity and liabilities | 6,900 | 5,930 |
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 (1,404 -1,080)
= 162
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 6,500 | 6,120 | 11,216 | (1,404) |
| Cost of sales | 3,900 | 2,448 | 5,106 | Derived |
| Gross profit | 2,600 | 3,672 | 6,110 | (162) |
| Other expeneses | 1,300 | 2,203 | 3,503 | |
| Net profit | 1,300 | 1,469 | 2,607 | |
| Income tax | 260 | 294 | 554 | |
| Profit for the year | 1,040 | 1,175 | 2,053 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 1,100 | 5,400 | 6,500 | |
| Investment in P | 4,950 | Delete | ||
| Goodwill | 3,701 | Working | ||
| Current Assets | ||||
| Inventory | 400 | 240 | 478 | (162) |
| Receivables | 350 | 210 | 560 | |
| Bank | 100 | 80 | 180 | |
| 850 | 530 | 1,218 | ||
| Total Assets | 6,900 | 5,930 | 11,419 | |
| Equity | ||||
| $1 ordinary shares | 750 | 1,350 | 750 | Delete P |
| Retained earnings | 5,585 | 4,155 | 8,680 | Working |
| NCI | 999 | Working | ||
| Payables | 250 | 150 | 400 | |
| Tax | 315 | 275 | 590 | |
| Total equity and liabilities | 6,900 | 5,930 | 11,419 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$4,950 + $185 -$1,350 -$84
=$3,701
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=185 + 814
=$999
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=5,585 +3,257-162
=$8,680
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