The document is a consolidated statement of financial position for K Group as of November 30, 2019. It shows the group's total assets are £450,000, consisting of non-current assets of £354,000 such as goodwill and property, and current assets of £96,000 including inventory, receivables, and cash. On the liabilities and equity side, total equity is £319,000 made up of share capital, retained earnings, and non-controlling interests. Non-current liabilities include £50,000 in debentures and current liabilities are £81,500 in payables. Workings provide details on the group structure, subsidiary net assets, calculation of goodwill, non-
The document is a consolidated statement of financial position for K Group as of November 30, 2019. It shows the group's total assets are £450,000, consisting of non-current assets of £354,000 such as goodwill and property, and current assets of £96,000 including inventory, receivables, and cash. On the liabilities and equity side, total equity is £319,000 made up of share capital, retained earnings, and non-controlling interests. Non-current liabilities include £50,000 in debentures and current liabilities are £81,500 in payables. Workings provide details on the group structure, subsidiary net assets, calculation of goodwill, non-
The document is a consolidated statement of financial position for K Group as of November 30, 2019. It shows the group's total assets are £450,000, consisting of non-current assets of £354,000 such as goodwill and property, and current assets of £96,000 including inventory, receivables, and cash. On the liabilities and equity side, total equity is £319,000 made up of share capital, retained earnings, and non-controlling interests. Non-current liabilities include £50,000 in debentures and current liabilities are £81,500 in payables. Workings provide details on the group structure, subsidiary net assets, calculation of goodwill, non-
The document is a consolidated statement of financial position for K Group as of November 30, 2019. It shows the group's total assets are £450,000, consisting of non-current assets of £354,000 such as goodwill and property, and current assets of £96,000 including inventory, receivables, and cash. On the liabilities and equity side, total equity is £319,000 made up of share capital, retained earnings, and non-controlling interests. Non-current liabilities include £50,000 in debentures and current liabilities are £81,500 in payables. Workings provide details on the group structure, subsidiary net assets, calculation of goodwill, non-
Current assets Inventory (20,000+22,000-2,500)) (W6) 39,500 Receivables (24,000 + 25,000 – 6,000 inter co) 43,000 Bank and cash (7,000+5,000+1,500 cash in transit) 13,500 _______ 96,000
Total assets 451,000___
Equity Share capital 98,000 Retained earnings (W5) 181,100
Current liabilities Payables (48000 +38000-4,500 interco) 81,500 _______ 451,000 _______
Adjust for cash in transit as it will have been taken out of the bank of one of the group but not yet appearing the bank of the other group member. If we did not add it in, it would not be represented in the group figures. Adjust receivables as the £6,000 is an intra group transaction and as group accounts treats the ‘group’ as a single entity inter group transactions should be contra’d off. Workings for the CSFP above
1. ONCE YOU HAVE WRITTEN OUT YOUR PRO-FORMA AS ABOVE,
COMPLETE W1-W7.
2. NOW ADD ACROSS THE PARENT AND SUBSIDIARY ASSETS AND
LIABILITIES AND INSERT FIGURES ONTO THE CSFP.
3. REMEMBER: SHARE CAPITAL OF THE GROUP IS THE SHARE CAPITAL
OF PARENT ONLY.
4. DO NOT INCLUDE THE PARENT’S INVESTMENT IN THE SUBSIDIARY
IN THE CSFP AS THIS IS REPRESENTED BY THE NET ASSETS ACQUIRED AND ANY EXCESS IS CALCULATED AS GOODWILL.
(W1) GROUP STRUCTURE
Parent owns 60% of subsidiary.
(W2) NET ASSETS OF SUBSIDIARY
Acquisition date Reporting date
Share capital 35,000 35,000 Retained Earnings 50,000 74,000
PUP (If subs is the seller) (2,500)
85,000 106,500 ________ _______
Post -acquisition reserves = £21,500 (£106,500 - £85,000)
(W3) Goodwill
£ Cost of investment 130,000
FV of NCI 35,000 Fair value of net assets acquired. W2-(100% x 85,000) (85,000) ________ Goodwill at acquisition 80,000 Impairment (we are told this in the question) (8,000) ________ Goodwill at reporting date 72,000 ________
The difference between what we pay for the company and the fair value of its assets gives us the goodwill at acquisition.
We are told there is impairment of £8,000 by the reporting date so we need to deduct this amount from the goodwill to represent the value of goodwill at the reporting date. Since NCI is valued using the FV method, the impairment is apportioned between NCI and Retained earnings.
DR Group Retained earnings (60% x 8000) 4,600
DR NCI (40% x 8000) 3,200 Cr Goodwill 8,000
(W4) Non controlling interest
Non-controlling interests At Acq 35,000 Post acq 40% x 21,500 8,600 Impairment 40% x 8,000 (3,200) ––––––– non-controlling interest 40,400
(W5) Consolidated reserves R.Earnings.
£ K – Parent 173,000 S – Subs (106,500 - 85,000) x 60% 12,900
PUP -
Impairment (W3) (8,000 x 60%) (4,800)
_______ 181,100 _______
We deduct the PUP from sub’s net assets as S sold the goods and therefore made the profit on sale and we also adjust the inventory figures as at the year end this PUP makes up part of the stock figure.
(W6) PUP
25/100 x 10,000 = £2,500
As S sold the goods we adjust W2 and the inventory on the face of the CSFP.
DR Sub’s net assets at reporting date (W2) 2,500
CR Inventory 2,500
Please note: If K had sold the goods instead, we would have adjusted W5 and the inventory on the face of the CSFP.
DR Group Retained Earnings (W5) 2,500
CR Inventory 2,500
(W7) INTER-CO BALANCE ELIMINATION
DR Bank 1,500 DR Payables 4,500 CR Receivables 6,000 b)BU6013 Consolidated statement of financial position – K Group as at 30 November 2019
Current assets Inventory (20,000+22,000-2,500)) (W6) 39,500 Receivables (24,000 + 25,000 – 6,000 inter co) 43,000 Bank and cash (7,000+5,000+1,500 cash in transit) 13,500 _______ 96,000
Total assets 450,000___
Equity Share capital 98,000 Retained earnings (W5) 177,900
Current liabilities Payables (48000 +38000-4,500 interco) 81,500 _______ 450,000 _______ Adjust for cash in transit as it will have been taken out of the bank of one of the group but not yet appearing the bank of the other group member. If we did not add it in, it would not be represented in the group figures. Adjust receivables as the £6,000 is an intra group transaction and as group accounts treats the ‘group’ as a single entity inter group transactions should be contra’d off.
Workings for the CSFP above
5. ONCE YOU HAVE WRITTEN OUT YOUR PRO-FORMA AS ABOVE,
COMPLETE W1-W7.
6. NOW ADD ACROSS THE PARENT AND SUBSIDIARY ASSETS AND
LIABILITIES AND INSERT FIGURES ONTO THE CSFP.
7. REMEMBER: SHARE CAPITAL OF THE GROUP IS THE SHARE CAPITAL
OF PARENT ONLY.
8. DO NOT INCLUDE THE PARENT’S INVESTMENT IN THE SUBSIDIARY
IN THE CSFP AS THIS IS REPRESENTED BY THE NET ASSETS ACQUIRED AND ANY EXCESS IS CALCULATED AS GOODWILL.
(W1) GROUP STRUCTURE
Parent owns 60% of subsidiary.
(W2) NET ASSETS OF SUBSIDIARY
Acquisition date Reporting date
Share capital 35,000 35,000 Retained Earnings 50,000 74,000
BV value of net assets acquired. W2-(100% x 85,000) (85,000) ________ Goodwill at acquisition 79,000 Impairment (we are told this in the question) (8,000) ________ Goodwill at reporting date 71,000 ________
The difference between what we pay for the company and the fair value of its assets gives us the goodwill at acquisition.
We are told there is impairment of £8,000 by the reporting date so we need to deduct this amount from the goodwill to represent the value of goodwill at the reporting date. Since NCI is valued using the proportionate method, the impairment is wholly allocated to Retained earnings.
DR Group Retained earnings 8,000
Cr Goodwill 8,000
(W4) Non controlling interest
Non-controlling interests At Acq 34,000 Post acq 40% x 21,500 8,600 Impairment (FV Method only) ––––––– non-controlling interest 42,600
(W5) Consolidated reserves R.Earnings.
£ K – Parent 173,000 S – Subs (106,500 - 85,000) x 60% 12,900
PUP ( If parent is the seller) -
Impairment (W3) (8,000 x 100%) (8,000)
_______ 177,900 _______
We deduct the PUP from sub’s net assets as S sold the goods and therefore made the profit on sale and we also adjust the inventory figures as at the year end this PUP makes up part of the stock figure.
(W6) PUP
25/100 x 10,000 = £2,500
As S sold the goods we adjust W2 and the inventory on the face of the CSFP.
DR Sub’s net assets at reporting date (W2) 2,500
CR Inventory 2,500
Please note: If K had sold the goods instead, we would have adjusted W5 and the inventory on the face of the CSFP.
DR Group Retained Earnings (W5) 2,500
CR Inventory 2,500
(W7) INTER-CO BALANCE ELIMINATION
DR Bank 1,500 DR Payables 4,500 CR Receivables 6,000
