QUESTION 82: BASIC CONSOLIDATION

Transcription

1 QUETION 82: BAIC CONOLIDATION On 1 October 2012, Paradigm acquired 75% of trata s equity shares by means of a share exchange of two new shares in Paradigm for every five acquired shares in trata. In addition, Paradigm issued to the shareholders of trata a $100 10% loan note for every 1,000 shares it acquired in trata. Paradigm has not recorded any of the purchase consideration, although it does have other 10% loan notes already in issue. The market value of Paradigm s shares at 1 October 2012 was $2 each. The summarised statements of financial position of the two companies as at 31 March 2013 are: Paradigm trata Assets $ 000 $ 000 Non-current assets Property, plant and equipment 47,400 25,500 Financial asset: equity investments (notes (i) and (iii)) 7,500 3,200 54,900 28,700 Current assets Inventory (note (ii)) 20,400 8,400 Trade receivables 14,800 9,000 Bank 2,100 nil Total assets 92,200 46,100 Equity and liabilities Equity Equity shares of $1 each 40,000 20,000 Retained earnings/(losses) at 1 April ,200 (4,000) for year ended 31 March ,400 8,000 66,600 24,000 Non-current liabilities 10% loan notes 8,000 nil Current liabilities Trade payables 17,600 13,000 Bank overdraft nil 9,100 Total equity and liabilities 92,200 46,100 The following information is relevant: (i) At the date of acquisition, trata produced a draft statement of profit or loss which showed it had made a net loss after tax of $2 million at that date. Paradigm accepted this figure as the basis for calculating the pre- and post-acquisition split of trata s profit for the year ended 31 March Also at the date of acquisition, Paradigm conducted a fair value exercise on trata s net assets which were equal to their carrying amounts (including trata s financial asset equity investments) with the exception of an item of plant which had a fair value of $3 million below its carrying amount. The plant had a remaining economic life of three years at 1 October Paradigm s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, a share price for trata of $1 20 each is representative of the fair value of the shares held by the non-controlling interest. (ii) Each month since acquisition, Paradigm s sales to trata were consistently $4 6 million. Paradigm had marked these up by 15% on cost. trata had one month s supply ($4 6 Page 1 of 5 (kashifadeel.com)

2 million) of these goods in inventory at 31 March Paradigm s normal mark-up (to third party customers) is 40%. (iii) The financial asset equity investments of Paradigm and trata are carried at their fair values as at 1 April As at 31 March 2013, these had fair values of $7 1 million and $3 9 million respectively. (iv) There were no impairment losses within the group during the year ended 31 March Required: Prepare the consolidated statement of financial position for Paradigm as at 31 March (15 marks) ACCA F7 June 2013 Q1 Page 2 of 5 (kashifadeel.com)

3 ANWER TO QUETION 82: BAIC CONOLIDATION Paradigm Group Consolidated FP as at 31 March 2013 Non-current assets $000 $000 Property, plant and equipment $47, ,500-3,000 J J4 70,400 Financial asset 7, , J J7 11,000 Goodwill W3 8,500 89,900 Current assets Inventory 20, , J5 28,200 Trade receivables 14, ,000 23,800 Bank 2, ,100 54,100 Total assets 144,000 Equity Equity shares of $1 each $40, ,000 J1 46,000 hare premiumj1 6,000 Retained earnings W6 33,925 Non-Controlling interest W5 8,800 94,725 Non current liabilities 10% loan notes $8, ,500 J1 9,500 Current Liabilities Trade payables $17, , J2 30,675 Bank overdraft 0+9,100 9,100 39,775 Total equity and liabilities 144,000 W1 GROUP TRUCTURE trata ubsidiary Acquisition date:1 Apr 2012 Group = 75% NCI 25% $000 W2 NET AET (of subsidiary) AT ACQUIITION Equity share capital 20,000 Retained earnings (4,000)+(2,000) (6,000) J3 (3,000) 11,000 W3 GOODWILL Investment J1 13,500 Less: 11,000 W2 x 75%W1 (8,250) 5,250 Fair value of NCI 20,000 x 25% x $1.2 6,000 Less: 11,000 W2 x 25%W1 (2,750) 3,250 8,500 Page 3 of 5 (kashifadeel.com)

4 W4 POT ACQUIITION REERVE (of subsidiary) RE RE 8,000+2,000 impact 10,000 J4 500 J ,200 W5 NON CONTROLLING INTERET 11,000 W2 x 25%W1 2,750 NCI goodwill W3 3,250 11,200 W4 x 25% W1 2,800 8,800 W6GROUP REERVE RE Parent reserves $19,200+7,400 26,600 J5 (600) J2 (75) J6 (400) 25,525 11,200 W4 x 75% W1 8,400 33,925 JOURNAL ENTRIE WITH WORKING Dr. $000 Cr. Investments 13,500 hare capital 6,000 1 hare premium 6,000 Loan notes 1,500 20,000 x 75% = 15,000 x 2/5 = 6,000 x $1 = 6,000 = 6,000 x $1 = 6,000 Loan notes 15,000 x $100/1,000 = 1,500 RE / FC (P) 75 2 Interest payable on loan notes 75 $1,500 x 10% x 6/12 = 75 3 RE (Pre) 3,000 PPE 3,000 4 PPE 500 RE (Post) 500 RE (P) Inventory 600 4,600x15/115=600 Page 4 of 5 (kashifadeel.com)

5 6 RE (P) 400 Investment Investment 700 RE () 700 Page 5 of 5 (kashifadeel.com)