ACFI3221 Week 4

Apple Co owns 60% of Pear Co. Apple has receivables of £60,000 and Pear has receivables of £40,000. Pear owes Apple £10,000.

 

What are consolidated receivables?

• £74,000

• £84,000

• £90,000

• £100,000

Answer explanation

£60,000 + £140,000 - £10,000 = £90,000

As we are treating the companies as one entity then you can’t owe yourself money!

Red Co acquired 80% of Blue Co’s 40,000 £1 ordinary share capital on 1 January 2012 for a consideration of £3.50 cash per share.

The fair value of the non-controlling interest was £50,000 and the fair value of the net assets acquired was £145,000. Goodwill is to be valued at its fair value

 

What should be recorded as consideration on acquisition of Blue Co in the consolidated financial statements?

• £17,000

• £45,000

• £46,000

• £112,000

Answer explanation

(40,000 shares x £3.50 per share x 80% owned) = £112,000

H sells to S goods worth £600. H makes 20% profit margin. S sells £200 of these goods at cost.

 

What is the unrealised profit?

• £50

• £60

• £70

• £80

S sells goods to H for £600. S makes a 20% mark up. H has goods at cost left in stock worth £200.

 

What is the unrealised profit?

• £30

• £33.33

• £39.67

• £43

Answer explanation

£600 x 20/120 x 1/3

Apple Co owns 60% of Pear Co. Apple has non-current assets of £80,000 and Pear has non-current assets of £50,000.

 

Consolidated non-current assets is calculated as:

• £130,000

• £110,000

• £80,000

• £78,000

Answer explanation

£80,000 + £50,000 = £130,000

If an entity is controlled then all the assets and liabilities are consolidated not a proportion of them