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Consolidation Question Solution PDF

The consolidated statement of financial position shows total assets of $341,650 as of November 30, 20X7. Major assets include goodwill of $21,250, property, plant and equipment of $248,500, and current assets including inventory of $30,400 and receivables of $35,000. Total equity is $287,150 consisting of share capital, retained earnings, and non-controlling interest. Current liabilities are $54,500. Various workings in the notes provide details on the group structure, values of assets and liabilities acquired in a business combination, and calculations of goodwill and equity amounts.

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12K views3 pages

Consolidation Question Solution PDF

The consolidated statement of financial position shows total assets of $341,650 as of November 30, 20X7. Major assets include goodwill of $21,250, property, plant and equipment of $248,500, and current assets including inventory of $30,400 and receivables of $35,000. Total equity is $287,150 consisting of share capital, retained earnings, and non-controlling interest. Current liabilities are $54,500. Various workings in the notes provide details on the group structure, values of assets and liabilities acquired in a business combination, and calculations of goodwill and equity amounts.

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joannejose2011
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Consolidated statement of financial position as at 30 November 20X7

$
Non•current assets

Goodwill (W3) 21,250

PPE
(138,000 + 115,000 – 4,500 (W8)) 248,500

Investments
(98,000 – 76,000 – 20,000) 2,000

Current Assets

Inventory
(15,000 + 17,000 – 1,600 (W7)) (Number 1) 30,400

Receivables
(19,000 + 20,000 – 2,500 (CIT) – 1,500 (intra•group)) 35,000 - 1500 EUR is paid by
Susan and Karl has recorded it in its Accounts Receivable. 1500 Susan has paid but
Karl has not recorded in Accounts Receivable.. Intercompany balances must be
removed, so we remove 4000 from AR

Cash
(2,000 + 2,500 (CIT)) 4,500 2500 is added because the
money paid from Susan is not recorded by Karl
–––––––
341,650
–––––––
Share capital 50,000
Group retained earnings (W6) 186,090
Non•controlling Interest (W5) 51,060
–––––––
287,150
Non•current liabilities
(20,000 – 20,000) –
Current liabilities
(33,000 + 23,000 – 1,500 (intra•group)) 54,500
–––––––
341,650

Workings:
(W1) Group structure
Karl Owns 60% Of Susan
Non control Interest =40% May-Nov =7/12
(W2) Net Assets of Subsidiary At Acqusition date (number 9)
$ Share capital 40,000
Retained earnings 63,750
––––––
103,750
––––––
RE @ reporting date 69,000
Post•acq profit (7/12 × 9,000) (number 5) 5,250
––––––
RE @ acq'n (balance) (ß) 63,750

(W3) Goodwill
Parent holding (investment) at fair value 76,000
NCI value at acquisition (number 3) 50,000
–––––––
126,000
Less:
Fair value of net assets at acquisition (W2) (103,750)
–––––––
Goodwill on acquisition 22,250
Impairment (number 4) (1,000)
–––––––
Carrying goodwill 21,250
––––––– $

(W4) Net Assets of Subsidiary


At Reporting date
Share capital 40,000
Retained earnings 69,000
PURP (W7) (1600)
107.400 3650
Total Profit for Susan for the
year is 9000. But Karl bought
Susan on 1-5-2019, out of 9000
only 7 months profit belong to
group = 9000 x 7/12 = 5250 ,
The rest 5 months belong to
shareholders of Susan 9000 –
5250 = 3650

(W5) Non•controlling interest


NCI value at acquisition (as in (W3)) 50,000
NCI share of post•acquisition reserves (W4)
(40% × $3,650) 1,460
Less: NCI share of impairment (W3)
(40% × $1,000) (400)
––––––
51,060
––––––
(W6) Group retained earnings
100% Karl 189,000
PURP (W8) (4,500)
60% Susan post•acq profit
(60% × 3,650 (W4)) 2,190
Impairment – group share
(60% × 1,000 (W3)) (600)
––––––
186,090
–––––
(W7) PURP – Inventory
Profit in inventory (25/125 × 8,000) 1,600 (number 1)

(W8) PURP – Plant


Carrying amount in SOFP (15,000 – (15,000 × 1/5 × 6/12)) 13,500 (number 2)
Depreciation (stated in question as 5 years life) for 1 year
Carrying amount should be
(10,000 – (10,000 × 1/5 × 6/12)) (9,000)
––––––
PURP 4,500

This PURP of 4500 is because The fixed asset has been sold at 15000 whereas its cost is 10000.

We should not record any profit of any sale between group companies.

Right now they have recorded wrongly like

15000 as value of asset less depreciation of (15000 x 1/5 x 6/12) = 15000 – 1500 = 13500

The correct approach is Fixed asset cost sold is 10000 less depreciation (10000x1/5x6/12) = 10000
– 1000 = 9000

Susan has recorded the asset at 13500 where as it should be 9000 hence PURP is 4500

PURP = Provision for Unrealised Profit

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