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 | 4,950 | 4,200 |
| Land & buildings | 2,280 | 1,380 |
| Investment in P | 4,950 | |
| Current Assets | ||
| Inventory | 50 | 30 |
| Receivables | 100 | 60 |
| Bank | 180 | 144 |
| 330 | 234 | |
| Total Assets | 12,510 | 5,814 |
| Equity | ||
| $1 ordinary shares | 2,600 | 3,300 |
| Reserves | 9,810 | 2,454 |
| Payables | 100 | 60 |
| Total equity and liabilities | 12,510 | 5,814 |
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 $28 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $555.
b. At the date of the acquisition the freehold land of P was valued at $60 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 $48 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
=$4,950 + $555 -$3,300 -$28 - $60
=$2,117
CONSOLIDATED FINANCIAL POSITION
| S | P | CONSO | REMARKS | |
| Plant | 4,950 | 4,200 | 9,150 | |
| Land & buildings | 2,280 | 1,380 | 3,720 | 60 |
| Investment in P | 4,950 | Delete | ||
| Goodwill | 2,117 | Working | ||
| Current Assets | ||||
| Inventory | 50 | 30 | 56 | (24) |
| Receivables | 100 | 60 | 112 | (48 ) |
| Bank | 180 | 144 | 324 | |
| 330 | 234 | 492 | ||
| Total Assets | 12,510 | 5,814 | 15,479 | |
| Equity | ||||
| $1 ordinary shares | 2,600 | 3,300 | 2,600 | Delete P |
| Reserves | 9,810 | 2,454 | 11,727 | Working |
| NCI | 1,040 | Working | ||
| Payables | 100 | 60 | 112 | (48) |
| Total equity and liabilities | 12,510 | 5,814 | 15,479 |
Working:
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P
=555 + 485
=$1,040
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)
=9,810 +1,941-24
=$11,727
To do the same topic again in ACCA F3 prepare consolidated financial position 2
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 2