S purchased 80% of C's equity on 1 January 2014 for $3,850 when Cat's retained earnings were $56. The fair value of the non-controlling interest on that date was $1,295. During the year, S sold goods which cost $240 to C, at an invoiced price of $312. 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 | 7,800 | 7,140 |
| Cost of sales | 4,680 | 2,856 |
| Gross profit | 3,120 | 4,284 |
| Other expeneses | 1,560 | 2,570 |
| Net profit | 1,560 | 1,714 |
| Income tax | 312 | 343 |
| Profit for the year | 1,248 | 1,371 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 3,850 | |
| Tangible non-current assets | 4,400 | 1,200 |
| Current Assets | ||
| Inventory | 200 | 120 |
| Receivables | 250 | 150 |
| Bank | 100 | 80 |
| 550 | 350 | |
| Total Assets | 8,800 | 1,550 |
| Equity | ||
| $1 ordinary shares | 500 | 600 |
| Retained earnings | 7,765 | 215 |
| Payables | 400 | 240 |
| Tax | 135 | 495 |
| Total equity and liabilities | 8,800 | 1,550 |
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 (312 -240)
= 36
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 7,800 | 7,140 | 14,628 | (312) |
| Cost of sales | 4,680 | 2,856 | 7,260 | Derived |
| Gross profit | 3,120 | 4,284 | 7,368 | (36) |
| Other expeneses | 1,560 | 2,570 | 4,130 | |
| Net profit | 1,560 | 1,714 | 3,238 | |
| Income tax | 312 | 343 | 655 | |
| Profit for the year | 1,248 | 1,371 | 2,583 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 4,400 | 1,200 | 5,600 | |
| Investment in P | 3,850 | Delete | ||
| Goodwill | 4,489 | Working | ||
| Current Assets | ||||
| Inventory | 200 | 120 | 284 | (36) |
| Receivables | 250 | 150 | 400 | |
| Bank | 100 | 80 | 180 | |
| 550 | 350 | 864 | ||
| Total Assets | 8,800 | 1,550 | 10,953 | |
| Equity | ||||
| $1 ordinary shares | 500 | 600 | 500 | Delete P |
| Retained earnings | 7,765 | 215 | 7,856 | Working |
| NCI | 1,327 | Working | ||
| Payables | 400 | 240 | 640 | |
| Tax | 135 | 495 | 630 | |
| Total equity and liabilities | 8,800 | 1,550 | 10,953 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$3,850 + $1,295 -$600 -$56
=$4,489
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,295 + 32
=$1,327
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=7,765 +127-36
=$7,856
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