S purchased 80% of C's equity on 1 January 2014 for $550 when Cat's retained earnings were $56. The fair value of the non-controlling interest on that date was $1,480. 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 | 9,100 | 5,100 |
Cost of sales | 5,460 | 2,040 |
Gross profit | 3,640 | 3,060 |
Other expeneses | 1,820 | 1,836 |
Net profit | 1,820 | 1,224 |
Income tax | 364 | 245 |
Profit for the year | 1,456 | 979 |
FINANCIAL POSITION
S | C | |
$ '000 | $ '000 | |
Investment in C | 550 | |
Tangible non-current assets | 2,750 | 4,200 |
Current Assets | ||
Inventory | 50 | 30 |
Receivables | 400 | 240 |
Bank | 120 | 96 |
570 | 366 | |
Total Assets | 3,870 | 4,566 |
Equity | ||
$1 ordinary shares | 2,250 | 1,050 |
Retained earnings | 1,225 | 3,196 |
Payables | 350 | 210 |
Tax | 45 | 110 |
Total equity and liabilities | 3,870 | 4,566 |
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 | 9,100 | 5,100 | 13,888 | (312) |
Cost of sales | 5,460 | 2,040 | 7,224 | Derived |
Gross profit | 3,640 | 3,060 | 6,664 | (36) |
Other expeneses | 1,820 | 1,836 | 3,656 | |
Net profit | 1,820 | 1,224 | 3,008 | |
Income tax | 364 | 245 | 609 | |
Profit for the year | 1,456 | 979 | 2,399 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
S | P | CONSO | REMARKS | |
Plant | 2,750 | 4,200 | 6,950 | |
Investment in P | 550 | Delete | ||
Goodwill | 924 | Working | ||
Current Assets | ||||
Inventory | 50 | 30 | 44 | (36) |
Receivables | 400 | 240 | 640 | |
Bank | 120 | 96 | 216 | |
570 | 366 | 900 | ||
Total Assets | 3,870 | 4,566 | 8,774 | |
Equity | ||||
$1 ordinary shares | 2,250 | 1,050 | 2,250 | Delete P |
Retained earnings | 1,225 | 3,196 | 3,701 | Working |
NCI | 2,108 | Working | ||
Payables | 350 | 210 | 560 | |
Tax | 45 | 110 | 155 | |
Total equity and liabilities | 3,870 | 4,566 | 8,774 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$550 + $1,480 -$1,050 -$56
=$924
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,480 + 628
=$2,108
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=1,225 +2,512-36
=$3,701
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