S purchased 80% of C's equity on 1 January 2014 for $4,950 when Cat's retained earnings were $28. The fair value of the non-controlling interest on that date was $1,480. 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 | 6,120 |
| Cost of sales | 780 | 2,448 |
| Gross profit | 520 | 3,672 |
| Other expeneses | 260 | 2,203 |
| Net profit | 260 | 1,469 |
| Income tax | 52 | 294 |
| Profit for the year | 208 | 1,175 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 4,950 | |
| Tangible non-current assets | 3,300 | 3,600 |
| Current Assets | ||
| Inventory | 350 | 210 |
| Receivables | 150 | 90 |
| Bank | 160 | 128 |
| 660 | 428 | |
| Total Assets | 8,910 | 4,028 |
| Equity | ||
| $1 ordinary shares | 1,750 | 300 |
| Retained earnings | 6,790 | 3,558 |
| Payables | 100 | 60 |
| Tax | 270 | 110 |
| Total equity and liabilities | 8,910 | 4,028 |
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 | 6,120 | 6,172 | (1,248) |
| Cost of sales | 780 | 2,448 | 2,124 | Derived |
| Gross profit | 520 | 3,672 | 4,048 | (144) |
| Other expeneses | 260 | 2,203 | 2,463 | |
| Net profit | 260 | 1,469 | 1,585 | |
| Income tax | 52 | 294 | 346 | |
| Profit for the year | 208 | 1,175 | 1,239 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 3,300 | 3,600 | 6,900 | |
| Investment in P | 4,950 | Delete | ||
| Goodwill | 6,102 | Working | ||
| Current Assets | ||||
| Inventory | 350 | 210 | 416 | (144) |
| Receivables | 150 | 90 | 240 | |
| Bank | 160 | 128 | 288 | |
| 660 | 428 | 944 | ||
| Total Assets | 8,910 | 4,028 | 13,946 | |
| Equity | ||||
| $1 ordinary shares | 1,750 | 300 | 1,750 | Delete P |
| Retained earnings | 6,790 | 3,558 | 9,470 | Working |
| NCI | 2,186 | Working | ||
| Payables | 100 | 60 | 160 | |
| Tax | 270 | 110 | 380 | |
| Total equity and liabilities | 8,910 | 4,028 | 13,946 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$4,950 + $1,480 -$300 -$28
=$6,102
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,480 + 706
=$2,186
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=6,790 +2,824-144
=$9,470
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