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 | 1,560 | 4,560 |
| Investment in N | 4,040 | |
| Current Assets | ||
| Inventory | 200 | 120 |
| Receivables | 300 | 180 |
| Bank | 400 | 320 |
| 900 | 620 | |
| Total Assets | 6,500 | 5,180 |
| Equity | ||
| $1 ordinary shares | 5,000 | 4,000 |
| Retained Earnings | 1,200 | 960 |
| 6,200 | 4,960 | |
| Payables | 100 | 60 |
| Tax | 200 | 160 |
| Total equity and liabilities | 6,500 | 5,180 |
The following information is also available.
a. P purchased 70% of shares in N a year ago when N had retained earnings of $480. 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 $48 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 $14 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
=$4,040 + $1,440 -$4,000 -$480
=$1,000
CONSOLIDATED FINANCIAL POSITION
| P | N | CONSO | REMARKS | |
| Property plant and equipment | 1,560 | 4,560 | 6,120 | |
| Investment in N | 4,040 | ADJ | ||
| Goodwill | 1,000 | ADJ | ||
| Current Assets | ||||
| Inventory | 200 | 120 | 316 | ADJ |
| Receivables | 300 | 180 | 466 | ADJ |
| Bank | 400 | 320 | 720 | |
| 900 | 620 | 1,502 | ||
| Total Assets | 6,500 | 5,180 | 8,622 | |
| Equity | ||||
| $1 ordinary shares | 5,000 | 4,000 | 5,000 | ADJ |
| Retained Earnings | 1,200 | 960 | 1,532 | ADJ |
| NCI | 1,584 | ADJ | ||
| 6,200 | 4,960 | 8,116 | ||
| Payables | 100 | 60 | 146 | ADJ |
| Tax | 200 | 160 | 360 | |
| Total equity and liabilities | 6,500 | 5,180 | 8,622 |
Working:
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM N
=1,440 + 144
=$1,584
CONSO RETAINED EARNINGS =P'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM N - UNREALISED PROFIT (P)
=1,200 +336-4
=$1,532
UNREALISED PROFIT = SALES /1.2 X0.2 X0.5
=48 / 1.2 X 0.2 X 0.5
=$4
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