ACCA F3 Prepare Consolidated Financial Position 2

The draft statements of financial position of S and its subsidiary company P at 31 December 2014 are as follows:

	S	P
	Million $	Million $
Plant	3,850	2,400
Land & buildings	4,104	3,105
Investment in P	3,300
Current Assets
Inventory	250	150
Receivables	250	150
Bank	100	80
	600	380
Total Assets	11,854	5,885
Equity
$1 ordinary shares	7,800	1,100
Reserves	3,904	4,695
Payables	150	90
Total equity and liabilities	11,854	5,885

The following information is also available.

a. S purchased 880 million shares in P some years ago, when P had a credit balance of $28 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $1,295.

b. At the date of the acquisition the freehold land of P was valued at $20 million in excess of its book value. The valuation was not recorded in the accounts of P.

c. P's inventory includes goods purchased from S at a price that includes a profit to S of $9 million.

d. At 31 December 2014 P owes S $60 million for goods purchased during the year.

Required.

a. Calculate the goodwill on acquisition.

b. Prepare the consolidated statement of financial position for S as at 31 December 2014.

Suggested Solutions:

A. GOODWILL

=CONSIDERATION + NCI AT ACQUISITION - SHARE OF N - PREACQUISITION RESERVE -FAIR VALUE ADJUSTMENT

=$3,300 + $1,295 -$1,100 -$28 - $20

=$3,447

CONSOLIDATED FINANCIAL POSITION

	S	P	CONSO	REMARKS
Plant	3,850	2,400	6,250
Land & buildings	4,104	3,105	7,229	20
Investment in P	3,300			Delete
Goodwill			3,447	Working
Current Assets
Inventory	250	150	391	(9)
Receivables	250	150	340	(60 )
Bank	100	80	180
	600	380	911
Total Assets	11,854	5,885	17,837
Equity
$1 ordinary shares	7,800	1,100	7,800	Delete P
Reserves	3,904	4,695	7,629	Working
NCI			2,228	Working
Payables	150	90	180	(60)
Total equity and liabilities	11,854	5,885	17,837

Working:

NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P

=1,295 + 933

=$2,228

CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)

=3,904 +3,734-9

=$7,629

To do the same topic again in ACCA F3 prepare consolidated financial position 2

To do another topic in ACCA F3