SOLUTION ONE

Working 1- Group Structure

6 months post/pre Memory

40% 75%

Ashley Mayaba (.5)

Working 2- Net Assets

Mayaba Ashley

At Acq At Rptg At Acq At Rptg

Share Capital 64,000 64,000 40,000 40,000

Retained Earn 132,000 140,000 144,000 168,000

Fair Value 16,000 16,000

Add Depn (800) _______ _______

212,000(.5) 219,200(1) 184,000 (.5) 208,000 (.5)

Working 3- Goodwill

Group NCI

Purchase Consideration 230,400 (1) 72,000 (1)

Share of NA @DOA (159,000) (53,000)

Goodwill 71,400 19,000

Impairment (6,780)(.5) (2,260) (.5)

64,620 (.5) 16,740 (.5)

Working 4 – NCI

Mayaba NCI 54,800

Add: Share of Goodwill 16,740

71,540 (1)

Working 5- Group Retained Earnings

Memory’s retained earnings 217,600 (.5)

Share of Post Acq-Mayaba 5,400 (.5)

- Ashley 9,600 (.5)

Goodwill Impaired (6,780) (.5)

Impairment-Investment in Ass (2,600) (2)

Impairment-Buildings (5,000) (2)

PURP Inventory (4,800) (1)

213,420 (.5)

Working 6- Carrying amount of Investment in Ashley

Shares 64,000

Loan stock 32,000

96,000 (2)

Add: Post Acq profits 9,600 (.5)

Less Impairment (2,600) (.5)

103,000

Statement of Financial Position

Assets

Non-Current Assets

Goodwill 81,360 (.5)

PPE 506,200 (2)

Investment in Ashley 103,000 (.5)

Other Investments 33,600 (1)

724,160

Inventory 161,600 (2)

Receivables 36,800 (1)

922,560

Share Capital 200,000 (.5)

Share Premium 158,400 (.5)

Retained Earnings 213,420 (1)

NCI 71,540 (1)

643,360

Loan stock 132,000 (.5)

Current liabilities 147,200 (1)

922,560

SOLUTION TWO

We went through this example in class though we did the statement of financial Position on the day
we completed looking at SFP and income statement was equally done on a different. Please check
your notes

SOLUTION THREE

Mwansa Ltd Group consolidated statement of financial position of the as at 31

March 2014
ASSETS K’000
Non-Current Assets
Goodwill

Property, Plant and Equipment

(1,180,000+1,450,000+16,000-4,500-800) 2,640,700
Investments (2,000,000 +650,000-1822, 500) 827,500
Other Intangible Assets 70,000
4,314,700
Current Assets
Inventory (600,000+200,000 +14,400-4,800) 809,600
Trade Receivables (250,000+149,000-27,200) 371,800
Cash at bank and in hard 76,000
1,257,400
Total Assets 5,572,100
EQUITY AND LIABILITIES
Share Capital (K 1 each) 1,020,000
Share Premium 810,000
Retained Earnings (w4) 2,323,100
Non Controlling Interest (w3) 545,800
4,698,900
Non-Current Liabilities 76,000
Current Liabilities (240,000+570,000 +14,400-27,200) 797,200
873,200
Total Equity and Liabilities 5,572,100

Mwansa Ltd Group consolidated statement of Comprehensive Income for the year
ended 31 March 2014
K’000
Revenue (2,050,000 – 14,400,000) 2,035,600
Cost of Sales (w9) (1,090,700)
Gross Profit 944,900
Administrative Expenses (100,000)
Distribution Costs (73,200)
Operating Profit 771,700
Finance Costs (75,00)
Profit before tax 764,200
Taxation (9,100)
Profit for the year 755,100
Attributable to:
NCI (384,000-800) x 0.25 95,800
Group (755,100-95,800) 659,300
755,100
Workings K’000
1. Purchase Consideration

(75% x 900,000 shares) x 3/2 x K 1.8 per share = K 1,822,500

2. Goodwill

Purchase consideration (w1) 1,822,500

Less: Net Assets on day of Acquisition
Equity Shares 900,000
Retained Earnings (964,000-384,000) 580,000
Fair value adjustment-Factory 16,000

(1,496,000)
326,500
Fair value of NCI on day of Acquisition
25% x 900,000 shares x K 2.00 per share 450,000
Goodwill 776,500
3. Non-Controlling Interest
Fair value of NCI on day of Acquisition (w2) 450,000
Share of Post Acquisition profits of Luyando;
Equity Shares 900,000
Retained Earnings 964,000
Fair value adjustment-Factory 16,000
Less: Additional Depreciation (800)
1,879,200
Less: Net Assets on day of Acquisition (w2) 1,496,000
Post Acquisition Profits 383,200
25% 95,800
545,800

4. Group Retained Earnings

Mwansa’s Retained Earnings 2,045,000
Share of Post Acquisition profits of Luyando
75% x 383,000(w3) 287,400
Impairment loss: Buildings (w5) (4,500)
PURP-Inventories (w6) (4,800)
2,323,100
 5. Impairment loss-Building

Purchased on 1 April 2009 100,000

100,000
Accumulated Depreciation x 5 years (25,000)
20 years
Carrying amount at 31March 2014 75,000
Impairment loss (balancing figure) (4,500)
Carrying amount after impairment 70,500

6. PURP-Inventory
50% in the question is mark up and the K 14,400, 000 is the selling price. We
have to convert mark up to margin and then multiply by the selling prices.

1
14,400 x = K 4,800
1+ 2

SOLUTION FOUR

Part a

i) Goodwill
Purchase Consideration (160,000/5 x 12.5) 400,000
Less NA @DOA
Share Capital 200,000
Retained Earnings 60,000
Share Premium 100,000
FV Adjustment 90,000
450,000
Share @ 80% (360,000)

Goodwill 40,000

Less: Impairment (20,000)

Goodwill 20,000

ii) Sunderland Consolidated Income Statement for the year ended 30 April 2014

Revenue (2,500 + 650 – 100) 3,050

Cost of sales (1,000 + 385 – 100 + 8 + 20) (1,313)
 Gross Profit 1,737
Distribution costs ( 325 + 86) (411)
Admin expenses (450 + 99) (549)
Profit from operations 777
Interest received (31 + 12 – 10) 33
Debenture interest payable (40 + 25 -10) (55)
Profit before tax 755
Taxation (183 + 17) (200)
Profit for the year 555
Attributed to:
NCI (20% x 50) 10
Group 545
iii) Consolidated Retained Earnings

Sunderland Queenspark

Balance b/f 950 200

Less: Pre acquisition RE (60)

Post Acq RE 140

Share of post Acq (80%) 112

Add: Share of profit for the year 545

1,607

Less: Dividends paid (200)

RE c/f 1,407

Part b

Lasso holds 30% in Nadine and this gives Lasso Significant Influence of Nadine. This
means that Nadine is an Associate of Lasso. Lasso will have to use the equity method of
accounting for the investment in Nadine.

In Lasso statement of Financial Position, Lasso will have to account for the consideration
paid to acquire Nadine plus share of post-acquisition profits of Nadine

In the Income Statement, Lasso will have add its share of Nadine’s profit after tax (30%
if 60,000) and add to its profit before tax.