S purchased 80% of C's equity on 1 January 2014 for $2,200 when Cat's retained earnings were $42. The fair value of the non-controlling interest on that date was $1,295. During the year, S sold goods which cost $840 to C, at an invoiced price of $1,092. 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 | 5,100 |
| Cost of sales | 3,900 | 2,040 |
| Gross profit | 2,600 | 3,060 |
| Other expeneses | 1,300 | 1,836 |
| Net profit | 1,300 | 1,224 |
| Income tax | 260 | 245 |
| Profit for the year | 1,040 | 979 |
FINANCIAL POSITION
| S | C | |
| $ '000 | $ '000 | |
| Investment in C | 2,200 | |
| Tangible non-current assets | 1,100 | 3,000 |
| Current Assets | ||
| Inventory | 50 | 30 |
| Receivables | 150 | 90 |
| Bank | 100 | 80 |
| 300 | 200 | |
| Total Assets | 3,600 | 3,200 |
| Equity | ||
| $1 ordinary shares | 1,000 | 750 |
| Retained earnings | 2,070 | 1,965 |
| Payables | 350 | 210 |
| Tax | 180 | 275 |
| Total equity and liabilities | 3,600 | 3,200 |
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 (1,092 -840)
= 126
| S | C | CONSO | REMARKS | |
| $ '000 | $ '000 | $ '000 | ||
| Revenue | 6,500 | 5,100 | 10,508 | (1,092) |
| Cost of sales | 3,900 | 2,040 | 4,974 | Derived |
| Gross profit | 2,600 | 3,060 | 5,534 | (126) |
| Other expeneses | 1,300 | 1,836 | 3,136 | |
| Net profit | 1,300 | 1,224 | 2,398 | |
| Income tax | 260 | 245 | 505 | |
| Profit for the year | 1,040 | 979 | 1,893 |
SUGGESTED SOLUTIONS (CONSOLIDATED FINANCIAL POSITION)
| S | P | CONSO | REMARKS | |
| Plant | 1,100 | 3,000 | 4,100 | |
| Investment in P | 2,200 | Delete | ||
| Goodwill | 2,703 | Working | ||
| Current Assets | ||||
| Inventory | 50 | 30 | -46 | (126) |
| Receivables | 150 | 90 | 240 | |
| Bank | 100 | 80 | 180 | |
| 300 | 200 | 374 | ||
| Total Assets | 3,600 | 3,200 | 7,177 | |
| Equity | ||||
| $1 ordinary shares | 1,000 | 750 | 1,000 | Delete P |
| Retained earnings | 2,070 | 1,965 | 3,482 | Working |
| NCI | 1,680 | Working | ||
| Payables | 350 | 210 | 560 | |
| Tax | 180 | 275 | 455 | |
| Total equity and liabilities | 3,600 | 3,200 | 7,177 |
Working:
GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF C - PREACQUISITION RETAINED EARNINGS
=$2,200 + $1,295 -$750 -$42
=$2,703
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM C
=1,295 + 385
=$1,680
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM C - UNREALISED PROFIT
=2,070 +1,538-126
=$3,482
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