S purchased 80% of C's equity on 1 January 2014 for $2,750 when Cat's retained earnings were $14. The fair value of the non-controlling interest on that date was $1,295. During the year, S sold goods which cost $960 to C, at an invoiced price of $1,248. 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 | 1,300 | 3,060 |
| Cost of sales | 780 | 1,224 |
| Gross profit | 520 | 1,836 |
| Other expeneses | 260 | 1,102 |
| Net profit | 260 | 734 |
| Income tax | 52 | 147 |
| Profit for the year | 208 | 588 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 2,750 | |
| Tangible non-current assets | 2,200 | 4,800 |
| Current Assets | ||
| Inventory | 50 | 30 |
| Receivables | 150 | 90 |
| Bank | 40 | 32 |
| 240 | 152 | |
| Total Assets | 5,190 | 4,952 |
| Equity | ||
| $1 ordinary shares | 250 | 300 |
| Retained earnings | 4,475 | 4,397 |
| Payables | 150 | 90 |
| Tax | 315 | 165 |
| Total equity and liabilities | 5,190 | 4,952 |
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 (1,248 -960)
= 144
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 1,300 | 3,060 | 3,112 | (1,248) |
| Cost of sales | 780 | 1,224 | 900 | Derived |
| Gross profit | 520 | 1,836 | 2,212 | (144) |
| Other expeneses | 260 | 1,102 | 1,362 | |
| Net profit | 260 | 734 | 850 | |
| Income tax | 52 | 147 | 199 | |
| Profit for the year | 208 | 588 | 652 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 2,200 | 4,800 | 7,000 | |
| Investment in P | 2,750 | Delete | ||
| Goodwill | 3,731 | Working | ||
| Current Assets | ||||
| Inventory | 50 | 30 | -64 | (144) |
| Receivables | 150 | 90 | 240 | |
| Bank | 40 | 32 | 72 | |
| 240 | 152 | 248 | ||
| Total Assets | 5,190 | 4,952 | 10,979 | |
| Equity | ||||
| $1 ordinary shares | 250 | 300 | 250 | Delete P |
| Retained earnings | 4,475 | 4,397 | 7,837 | Working |
| NCI | 2,172 | Working | ||
| Payables | 150 | 90 | 240 | |
| Tax | 315 | 165 | 480 | |
| Total equity and liabilities | 5,190 | 4,952 | 10,979 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$2,750 + $1,295 -$300 -$14
=$3,731
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,295 + 877
=$2,172
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=4,475 +3,506-144
=$7,837
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