S purchased 80% of C's equity on 1 January 2014 for $1,100 when Cat's retained earnings were $84. The fair value of the non-controlling interest on that date was $1,665. During the year, S sold goods which cost $1,080 to C, at an invoiced price of $1,404. 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 | 6,500 | 3,060 |
| Cost of sales | 3,900 | 1,224 |
| Gross profit | 2,600 | 1,836 |
| Other expeneses | 1,300 | 1,102 |
| Net profit | 1,300 | 734 |
| Income tax | 260 | 147 |
| Profit for the year | 1,040 | 588 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 1,100 | |
| Tangible non-current assets | 3,850 | 3,000 |
| Current Assets | ||
| Inventory | 50 | 30 |
| Receivables | 50 | 30 |
| Bank | 140 | 112 |
| 240 | 172 | |
| Total Assets | 5,190 | 3,172 |
| Equity | ||
| $1 ordinary shares | 1,000 | 900 |
| Retained earnings | 3,520 | 1,647 |
| Payables | 400 | 240 |
| Tax | 270 | 385 |
| Total equity and liabilities | 5,190 | 3,172 |
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 (1,404 -1,080)
= 162
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 6,500 | 3,060 | 8,156 | (1,404) |
| Cost of sales | 3,900 | 1,224 | 3,882 | Derived |
| Gross profit | 2,600 | 1,836 | 4,274 | (162) |
| Other expeneses | 1,300 | 1,102 | 2,402 | |
| Net profit | 1,300 | 734 | 1,872 | |
| Income tax | 260 | 147 | 407 | |
| Profit for the year | 1,040 | 588 | 1,466 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 3,850 | 3,000 | 6,850 | |
| Investment in P | 1,100 | Delete | ||
| Goodwill | 1,781 | Working | ||
| Current Assets | ||||
| Inventory | 50 | 30 | -82 | (162) |
| Receivables | 50 | 30 | 80 | |
| Bank | 140 | 112 | 252 | |
| 240 | 172 | 250 | ||
| Total Assets | 5,190 | 3,172 | 8,881 | |
| Equity | ||||
| $1 ordinary shares | 1,000 | 900 | 1,000 | Delete P |
| Retained earnings | 3,520 | 1,647 | 4,608 | Working |
| NCI | 1,978 | Working | ||
| Payables | 400 | 240 | 640 | |
| Tax | 270 | 385 | 655 | |
| Total equity and liabilities | 5,190 | 3,172 | 8,881 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$1,100 + $1,665 -$900 -$84
=$1,781
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,665 + 313
=$1,978
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=3,520 +1,250-162
=$4,608
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