S purchased 80% of C's equity on 1 January 2014 for $550 when Cat's retained earnings were $126. The fair value of the non-controlling interest on that date was $740. During the year, S sold goods which cost $600 to C, at an invoiced price of $780. Cat had 50% of the goods still in inventories at the year end. The two companies' draft financial statements are as follows:
PROFIT OR LOSS
| S | C | |
| $ '000 | $ '000 | |
| Revenue | 10,400 | 3,060 |
| Cost of sales | 6,240 | 1,224 |
| Gross profit | 4,160 | 1,836 |
| Other expeneses | 2,080 | 1,102 |
| Net profit | 2,080 | 734 |
| Income tax | 416 | 147 |
| Profit for the year | 1,664 | 588 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 550 | |
| Tangible non-current assets | 4,950 | 4,800 |
| Current Assets | ||
| Inventory | 350 | 210 |
| Receivables | 200 | 120 |
| Bank | 100 | 80 |
| 650 | 410 | |
| Total Assets | 6,150 | 5,210 |
| Equity | ||
| $1 ordinary shares | 2,250 | 1,200 |
| Retained earnings | 3,655 | 3,560 |
| Payables | 200 | 120 |
| Tax | 45 | 330 |
| Total equity and liabilities | 6,150 | 5,210 |
Prepare the draft consolidated statement of profit or loss and draft consolidated statement of financial position for the S group at 31 December 2014.
Suggested Solutions (CONSOLIDATED STATEMENT OF PROFIT OR LOSS)
Working:
Unrealised profit = 50% of (sales -cost)
=0.5 X (780 -600)
= 90
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 10,400 | 3,060 | 12,680 | (780) |
| Cost of sales | 6,240 | 1,224 | 6,774 | Derived |
| Gross profit | 4,160 | 1,836 | 5,906 | (90) |
| Other expeneses | 2,080 | 1,102 | 3,182 | |
| Net profit | 2,080 | 734 | 2,724 | |
| Income tax | 416 | 147 | 563 | |
| Profit for the year | 1,664 | 588 | 2,162 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 4,950 | 4,800 | 9,750 | |
| Investment in P | 550 | Delete | ||
| Goodwill | -36 | Working | ||
| Current Assets | ||||
| Inventory | 350 | 210 | 470 | (90) |
| Receivables | 200 | 120 | 320 | |
| Bank | 100 | 80 | 180 | |
| 650 | 410 | 970 | ||
| Total Assets | 6,150 | 5,210 | 10,684 | |
| Equity | ||||
| $1 ordinary shares | 2,250 | 1,200 | 2,250 | Delete P |
| Retained earnings | 3,655 | 3,560 | 6,312 | Working |
| NCI | 1,427 | Working | ||
| Payables | 200 | 120 | 320 | |
| Tax | 45 | 330 | 375 | |
| Total equity and liabilities | 6,150 | 5,210 | 10,684 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$550 + $740 -$1,200 -$126
=$-36
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=740 + 687
=$1,427
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=3,655 +2,747-90
=$6,312
To do the same topic again in ACCA F3 prepare consolidated financial position 3
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 3