The following are the financial statements relating to BL, and its subsidiary company BU.
PROFIT OR LOSS
| BL | BU | |
| $ '000 | $ '000 | |
| Revenue | 1,300 | 9,180 |
| Cost of sales | ( 520) | ( 1,836) |
| Gross profit | 780 | 7,344 |
| Distribution costs | (390) | (2,938) |
| Administrative expenses | ( 156) | ( 734) |
| Dividend from BU | 468 | |
| Profit before tax | 702 | 3,672 |
| Tax | (140) | (734) |
| Profit for the year | 562 | 2,938 |
FINANCIAL POSITION
| BL | BU | |
| $ '000 | $ '000 | |
| Investment in C | 4,950 | |
| Tangible non-current assets | 4,400 | 4,800 |
| Current Assets | ||
| Inventory | 200 | 120 |
| Receivables | 50 | 30 |
| Bank | 100 | 80 |
| 350 | 230 | |
| Total Assets | 9,700 | 5,030 |
| Equity | ||
| $1 ordinary shares | 750 | 300 |
| Retained earnings | 8,270 | 4,380 |
| Payables | 400 | 240 |
| Tax | 280 | 110 |
| Total equity and liabilities | 9,700 | 5,030 |
Additional Information
a. Bl purchased 210 of its $1 ordinary shares in Bu on 1 November 2013. At that date the balance on Bu's retained earnings was $112 . The fair value of the non-controlling interest at the date of the acquistion was $1,480.
b. During the year ended 31 October 2014 BL sold goods which originally cost $1,080 to BU.BL invoiced BU at cost plus 40%. BU still has 20% of these goods in inventory.
c. Bu owed BL $40 for some of the goods BL supplied during the year.
Required
1. Calculate the goodwill arising on the acquisition of BU.
2. Prepare the consolidated statement of profit or loss and financial position as at 31 October 2014.
Suggested Solutions (CONSOLIDATED STATEMENT OF PROFIT OR LOSS)
Working:
Unrealised profit = 50% of (sales -cost)
=0.5 X (1,512 -1,080)
= $216
| BL | BU | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 1,300 | 9,180 | 8,968 | (1,512) |
| Cost of sales | (520) | (1,836) | (1,060) | Derived |
| Gross profit | 780 | 7,344 | 7,908 | (216) |
| Distribution expenses | (390) | (2,938) | (3,328) | |
| Administrative expenses | (156) | (734) | (890) | |
| Dividend from BU | 468 | Delete | ||
| Net profit | 702 | 3,672 | 3,690 | |
| Income tax | (140) | (734) | (875) | |
| Profit for the year | 562 | 2,938 | 2,815 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| BL | BU | CONSO | REMARKS | |
| Plant | 4,400 | 4,800 | 9,200 | |
| Investment in P | 4,950 | Delete | ||
| Goodwill | 6,018 | Working | ||
| Current Assets | ||||
| Inventory | 200 | 120 | 104 | (216) |
| Receivables | 50 | 30 | 40 | (40) |
| Bank | 100 | 80 | 180 | |
| 350 | 230 | 324 | ||
| Total Assets | 9,700 | 5,030 | 15,542 | |
| Equity | ||||
| $1 ordinary shares | 750 | 300 | 750 | Delete P |
| Retained earnings | 8,270 | 4,380 | 11,468 | Working |
| NCI | 2,334 | Working | ||
| Payables | 400 | 240 | 600 | (40) |
| Tax | 280 | 110 | 390 | |
| Total equity and liabilities | 9,700 | 5,030 | 15,542 |
Working:
GOODWILL =CONSIDERATION + NCI AT ACQUISITION - SHARES OF BU
- PREACQUISITION RETAINED EARNINGS
=$4,950 + $1,480 -$300 -$112
=$6,018
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM BU
=1,480 + 854
=$2,334
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM BU - UNREALISED PROFIT
=8,270 +3,414-216
=$11,468
To do the same topic again in ACCA F3 prepare consolidated financial position 4
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 4