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 | 170 | 4,120 |
| Investment in N | 4,880 | |
| Current Assets | ||
| Inventory | 250 | 150 |
| Receivables | 250 | 150 |
| Bank | 800 | 640 |
| 1,300 | 940 | |
| Total Assets | 6,350 | 5,060 |
| Equity | ||
| $1 ordinary shares | 5,000 | 4,000 |
| Retained Earnings | 800 | 640 |
| 5,800 | 4,640 | |
| Payables | 100 | 60 |
| Tax | 450 | 360 |
| Total equity and liabilities | 6,350 | 5,060 |
The following information is also available.
a. P purchased 70% of shares in N a year ago when N had retained earnings of $320. 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 $24 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 $7 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
=$4,880 + $1,440 -$4,000 -$320
=$2,000
CONSOLIDATED FINANCIAL POSITION
| P | N | CONSO | REMARKS | |
| Property plant and equipment | 170 | 4,120 | 4,290 | |
| Investment in N | 4,880 | ADJ | ||
| Goodwill | 2,000 | ADJ | ||
| Current Assets | ||||
| Inventory | 250 | 150 | 398 | ADJ |
| Receivables | 250 | 150 | 393 | ADJ |
| Bank | 800 | 640 | 1,440 | |
| 1,300 | 940 | 2,231 | ||
| Total Assets | 6,350 | 5,060 | 8,521 | |
| Equity | ||||
| $1 ordinary shares | 5,000 | 4,000 | 5,000 | ADJ |
| Retained Earnings | 800 | 640 | 1,022 | ADJ |
| NCI | 1,536 | ADJ | ||
| 5,800 | 4,640 | 7,558 | ||
| Payables | 100 | 60 | 153 | ADJ |
| Tax | 450 | 360 | 810 | |
| Total equity and liabilities | 6,350 | 5,060 | 8,521 |
Working:
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM N
=1,440 + 96
=$1,536
CONSO RETAINED EARNINGS =P'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM N - UNREALISED PROFIT (P)
=800 +224-2
=$1,022
UNREALISED PROFIT = SALES /1.2 X0.2 X0.5
=24 / 1.2 X 0.2 X 0.5
=$2
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