QUESTION 87: BASIC CONSOLIDATION

Transcription

1 QUETION 87: BAIC CONOLIDATION On 1 January 2015, Palistar acquired 75% of tretcher s equity shares by means of an immediate share exchange of two shares in Palistar for five shares in tretcher. The fair value of Palistar and tretcher s shares on 1 January 2015 were $4 00 and $3 00 respectively. In addition to the share exchange, Palistar will make a cash payment of $1 32 per acquired share, deferred until 1 January Palistar has not recorded any of the consideration for tretcher in its financial statements. Palistar s cost of capital is 10% per annum. The summarised statements of financial position of the two companies as at 30 June 2015 are: Palistar tretcher $ 000 $ 000 Assets Non-current assets (note (ii)) Property, plant and equipment 55,000 28,600 Financial asset equity investments (note (v)) 11,500 6,000 66,500 34,600 Current assets Inventory (note (iv)) 17,000 15,400 Trade receivables (note (iv)) 14,300 10,500 Bank 2,200 1,600 33,500 27,500 Total assets 100,000 62,100 Equity and liabilities Equity Equity shares of $1 each 20,000 20,000 Other component of equity 4,000 nil Retained earnings at 1 July ,200 14,000 for year ended 30 June ,000 10,000 74,200 44,000 Current liabilities (note (iv)) 25,800 18,100 Total equity and liabilities 100,000 62,100 The following information is relevant: (i) tretcher s business is seasonal and 60% of its annual profit is made in the period 1 January to 30 June each year. (ii) At the date of acquisition, the fair value of tretcher s net assets was equal to their carrying amounts with the following exceptions: The fair value of tretcher s investments was $7 million (see also note (v)). tretcher owned the rights to a popular mobile (cell) phone game. At the date of acquisition, a specialist valuer estimated that the rights were worth $12 million and had an estimated remaining life of five years. (iii) Following an impairment review, consolidated goodwill is to be written down by $3 million as at 30 June Page 1 of 5 (kashifadeel.com)

2 (iv) (v) (vi) Palistar sells goods to tretcher at cost plus 30%. tretcher had $1 8 million of goods in its inventory at 30 June 2015 which had been supplied by Palistar. In addition, on 28 June 2015, Palistar processed the sale of $800,000 of goods to tretcher, which tretcher did not account for until their receipt on 2 July The in-transit reconciliation should be achieved by assuming the transaction had been recorded in the books of tretcher before the year end. At 30 June 2015, Palistar had a trade receivable balance of $2 4 million due from tretcher which differed to the equivalent balance in tretcher s books due to the sale made on 28 June At 30 June 2015, the fair values of the financial asset equity investments of Palistar and tretcher were $13 2 million and $7 9 million respectively. Palistar s policy is to value the non-controlling interest at fair value at the date of acquisition. At 1 January 2015, this was valued at $15 million. Required: Prepare the consolidated statement of financial position for Palistar as at 30 June (20 marks) ACCA F7 ep/dec 2015 Q1 Page 2 of 5 (kashifadeel.com)

3 ANWER TO QUETION 87: BAIC CONOLIDATION Palistar Group Consolidated FP as at 30 June 2015 Non-current assets $000 $000 Property, plant and equipment 55, ,600 83,600 Game rights $12,000 J3-1,200 J4 10,800 Financial assets 11, , ,000 J3 + 2,600 J8 21,100 Goodwill W3 3, ,500 Current assets Inventory 17, , J6 600 J7 32,600 Trade receivables 14, ,500 2,400 J6 22,400 Bank 2, ,600 3,800 58,800 Total assets 177,300 Equity Equity shares of $1 each $20, ,000 J1 26,000 hare premium 4, ,000 J1 22,000 Retained earnings W6 52, ,425 Non-Controlling interest W5 15, ,100 Current Liabilities Deferred consideration 18, ,900 Other 25, ,100 1,600 J6 42,300 61,200 Total equity and liabilities 177,300 W1 GROUP TRUCTURE tretcher ubsidiary Acquisition date:1 Jan 2015 Group 75% NCI 25% $000 W2 NET AET (of subsidiary) AT ACQUIITION Equity share capital 20,000 Retained earnings Pre 14, ,000 x 40% 18,000 J3 13,000 51,000 W3 GOODWILL Investment J1 42,000 Less: 51,000 W2 x 75%W1 (38,250) 3,750 Fair value of NCI 20,000 x 25% x $3 15,000 Less: 51,000 W2 x 25%W1 (12,750) 2,250 6,000 J5 (3,000) 3,000 Page 3 of 5 (kashifadeel.com)

4 W4 POT ACQUIITION REERVE (of subsidiary) RE RE 10,000 x 60% 6,000 J4 (1,200) J5 (3,000) J ,700 W5 NON CONTROLLING INTERET 51,000 W2 x 25%W1 12,750 NCI goodwill W3 2,250 2,700 W4 x 25% W ,675 W6GROUP REERVE RE Parent reserves 26, ,000 50,200 J2 (900) J7 (600) J8 1,700 50,400 2,700 W4 x 75% W1 2,025 52,425 JOURNAL ENTRIE WITH WORKING Dr. $000 Cr. Investment in 42,000 hare capital 6,000 1 hare premium 18,000 Deferred consideration 18,000 Recording of investment 20,000 x 75% x 2/5 = 6,000 x $4 = $24,000 {6,000 C and 18,000 P} 20,000 x 75% x $1.32 / 1.1 = $18,000 RE (P) Deferred consideration ,000 x 10% x 6/12 = 900 Game rights 12,000 3 Investments 1,000 RE Pre () 13,000 Fair value adjustment RE () 1,200 4 PPE 1,200 $12,000 / 5 years = $2,400 x 6/12 = $1,200 Page 4 of 5 (kashifadeel.com)

5 5 Impairment RE () 3,000 Goodwill 3,000 Trade payables 1,600 6 Inventory in transit 800 Trade receivable 2,400 Cancellation of intra group balance RE (P) Inventory 600 $1, = $ 2,600 x 30 /130 = $600 Financial assets 2,600 8 RE () 900 RE (P) 1,700 Valuation of investments at year end Page 5 of 5 (kashifadeel.com)