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 | 1,020 | 4,260 |
| Investment in N | 4,280 | |
| Current Assets | ||
| Inventory | 50 | 30 |
| Receivables | 350 | 210 |
| Bank | 1,800 | 1,440 |
| 2,200 | 1,680 | |
| Total Assets | 7,500 | 5,940 |
| Equity | ||
| $1 ordinary shares | 5,000 | 4,000 |
| Retained Earnings | 1,800 | 1,440 |
| 6,800 | 5,440 | |
| Payables | 300 | 180 |
| Tax | 400 | 320 |
| Total equity and liabilities | 7,500 | 5,940 |
The following information is also available.
a. P purchased 70% of shares in N a year ago when N had retained earnings of $720. 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 $96 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 $29 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
=$4,280 + $1,440 -$4,000 -$720
=$1,000
CONSOLIDATED FINANCIAL POSITION
| P | N | CONSO | REMARKS | |
| Property plant and equipment | 1,020 | 4,260 | 5,280 | |
| Investment in N | 4,280 | ADJ | ||
| Goodwill | 1,000 | ADJ | ||
| Current Assets | ||||
| Inventory | 50 | 30 | 72 | ADJ |
| Receivables | 350 | 210 | 531 | ADJ |
| Bank | 1,800 | 1,440 | 3,240 | |
| 2,200 | 1,680 | 3,843 | ||
| Total Assets | 7,500 | 5,940 | 10,123 | |
| Equity | ||||
| $1 ordinary shares | 5,000 | 4,000 | 5,000 | ADJ |
| Retained Earnings | 1,800 | 1,440 | 2,296 | ADJ |
| NCI | 1,656 | ADJ | ||
| 6,800 | 5,440 | 8,952 | ||
| Payables | 300 | 180 | 451 | ADJ |
| Tax | 400 | 320 | 720 | |
| Total equity and liabilities | 7,500 | 5,940 | 10,123 |
Working:
NCI = NCI AT ACQUISITION + 30% SHARE OF POST ACQUISITION PROFIT FROM N
=1,440 + 216
=$1,656
CONSO RETAINED EARNINGS =P'S CONSOLIDATED PROFIT + 70% SHARE OF POST ACQUISITION PROFIT FROM N - UNREALISED PROFIT (P)
=1,800 +504-8
=$2,296
UNREALISED PROFIT = SALES /1.2 X0.2 X0.5
=96 / 1.2 X 0.2 X 0.5
=$8
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