Acc401-202324 Ga2-Even Groups

UNIVERSITY OF CAPE COAST
COLLEGE OF HUMANITIES AND LEGAL STUDIES

SCHOOL OF BUSINESS
DEPARTMENT OF ACCOUNTING
FIRST SEMESTER-2023/2024 ACADEMIC YEAR
ACC401 ADVANCED FINANCIAL REPORTING I-
GROUP ASSIGNMENT 2 – EVEN GROUP NUMBERS (GROUPS 2,4,6,8 ETC)
Question 1
The draft statements of financial position for Elmina, a parent and its subsidiary Komenda as at 31 December
2020 are given below:
Statements of Financial Positions as at 31 December 2020 Elmina Komenda
GH¢'000 GH¢'000
Non-current Assets
Property plant and equipment 1 933 000 1 092 000
Development 40 000
Investment in Komenda 305 000
Current Assets
Inventory 330 000 184 000
Receivables 198 000 152 000
Cash 381 000 32 000
Total Assets 3 147 000 1 500 000
Equity
Ordinary shares (GH¢1) 620 000 320 000
Retained earnings 1 140 000 720 000
Other components of equity 54 000
Non-current Liabilities
Long-term borrowings 600 000 170 000
Pension 150 000
Deferred tax 138 000 108 000
Current Liabilities
Trade payable 365 000 118 000
Short-term borrowings 80 000 64 000
Equity and Liabilities 3 147 000 1 500 000
pg. 1
1) On 1 July 2020, Elmina acquired 240 million shares in Komenda. Elmina paid an immediate cash of
300 million and the issue of Elmina shares for every share acquired in Komenda. Only the cash
payment has been recorded. Elmina also incurred transaction cost of GH¢5 million for the issue of
its shares which is included in the investment amount. The financial statements of Komenda showed
a balance of GH¢680 million on its retained earnings on 1 July 2020.
2) The directors of Elmina carried out a fair value exercise to measure the identifiable assets and
liabilities of Komenda at 1 July 2020. The following matters emerged:
• Non-depreciable land with a carrying amount of GH¢880 million had an estimated fair value of
GH¢960 million.
.
• On 1 July 2020, the directors of Elmina measured the non-controlling interest in Komenda at
proportion of net assets acquired. On 1 July 2020, the fair values of an equity share in Elmina
and Komenda were GH¢2.5 and GH¢2.00 respectively.
3) Prior to 1 January 2020, Elmina had no long-term borrowings. On 1 January 2020, Elmin borrowed
GH¢600 million to finance its future expansion plans. The term of the borrowings is five years and
the annual rate of interest payable on the borrowings is 6%, payable in arrears Elmina charged the
interest paid on 31 December 2020 as a finance cost in its financial statements for the year ended
31 December 2020. The borrowings are repayable in cash at the end of the five-year term or
convertible into equity shares on that date at the option of the lender. If the borrowings had not
contained a conversion option, the lender would have required an annual return of 8%, rather than
6%.
4) Elmina has established a defined benefit pension plan for its eligible employees. The statement of
financial position of Elmina at 31 December 2020 currently includes the estimated net liability at 31
December 2019. The following matters relate to the plan for the year ended 31 December 2020:
• The estimated current service cost was advised by the actuary to be GH¢360 million.
• On 31 December 2020, Elmina paid contributions of GH¢490 million into the plan and charged
this amount as an operating expense.
• The annual market yield on high quality corporate bonds on 1 January 2020 was 6%.
• The estimated net liability at 31 December 2020 was advised by the actuary to be GH¢53 million.
Benefits paid amounted to GH¢190 million.
Required: Prepare the consolidated statement of financial position of Elmina at 31 December

2020. Ignore the deferred tax implications of any adjustments you make. Note: You should show
all workings to the nearest GH¢’000.
pg. 2
Question 2
Seth acquired 30% of the equity shares of Ruby on 1 January 2020. Seth paid cash of GH¢5 million and
issued loan notes with a nominal value of GH¢2.2 million and a fair value of GH¢2.6 million to acquire the
equity interest. The remaining 70% of the equity in Ruby is owned equally between two unrelated companies.
All key operating decisions require unanimous consent of all three investing parties. Each of the three
investing parties has the right to its share of the net assets of Ruby via a contractual agreement. Ruby
reported a loss of GH¢1.6 million for the year ending 30 September 2020 and a dividend was neither paid
nor proposed.
Required:
a) Explain with justification how the investment in Ruby should be accounted for by Seth in the
separate and consolidated financial statements.
b) Calculate the carrying value of the investment in Ruby at 30 September 2020.
pg. 3

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UNIVERSITY OF CAPE COAST

COLLEGE OF HUMANITIES AND LEGAL STUDIES

Required: Prepare the consolidated statement of financial position of Elmina at 31 December

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