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	1,100	2,400
Land & buildings	2,736	2,415
Investment in P	3,300
Current Assets
Inventory	450	270
Receivables	250	150
Bank	140	112
	840	532
Total Assets	7,976	5,347
Equity
$1 ordinary shares	2,600	3,300
Reserves	5,026	1,837
Payables	350	210
Total equity and liabilities	7,976	5,347

The following information is also available.

a. S purchased 2,640 million shares in P some years ago, when P had a credit balance of $98 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $740.

b. At the date of the acquisition the freehold land of P was valued at $30 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 $24 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 + $740 -$3,300 -$98 - $30

=$612

CONSOLIDATED FINANCIAL POSITION

	S	P	CONSO	REMARKS
Plant	1,100	2,400	3,500
Land & buildings	2,736	2,415	5,181	30
Investment in P	3,300			Delete
Goodwill			612	Working
Current Assets
Inventory	450	270	696	(24)
Receivables	250	150	340	(60 )
Bank	140	112	252
	840	532	1,288
Total Assets	7,976	5,347	10,581
Equity
$1 ordinary shares	2,600	3,300	2,600	Delete P
Reserves	5,026	1,837	6,393	Working
NCI			1,088	Working
Payables	350	210	500	(60)
Total equity and liabilities	7,976	5,347	10,581

Working:

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

=740 + 348

=$1,088

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

=5,026 +1,391-24

=$6,393

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

To do another topic in ACCA F3