At 1 January 20X1 Barley acquired 100% of the share capital of Corn for $1,400,000. At that date the share capital of Corn consisted of 600,000 ordinary shares of 50 cents each and its retained earnings were $50,000.

On acquisition Corn had some assets whose carrying amount was $230,000 but the fair value was $250,000.

What was goodwill on acquisition?

Varsity acquired 80,000 ordinary shares in Weston some years ago. Extracts from the statements of financial position of the two companies as at 30 September 20X7 are as follows:
On acquisition the retained earnings of Weston showed a deficit of $10,000.

Goodwill has been impaired by $15,000 since acquisition. Non-controlling interest is measured at fair value on acquisition.

What were the consolidated retained earnings of Varsity on 30 September 20X7?

HW sold goods to SD, its 100% owned subsidiary on 1 February 20X1. The goods were sold to SD for $48,000. HW made a profit of 33.33% on the original cost of the goods.

At the year-end, 30 June 20X1, 40% of the goods had been sold by SD; the remainder was still in SD’s inventory and SD had not paid for any of the goods.

Use the amounts below to ensure that the following statement correctly represents the adjustments required in HW group’s consolidated statement of financial position at 30 June 20X1.
(1) Reduce inventory and retained earnings by
(2) Reduce payables and receivables by

Salt owns 100% of Pepper. During the year Salt sold goods to Pepper for a sales price of $1,044,000, generating a margin of 25%. 40% of these goods had been sold on by Pepper to external parties at the end of the reporting period.

What adjustment for unrealised profit should be made in preparing Salt’s consolidated financial statements? (Answer in $ in the Answer box)

Identify, by clicking on the relevant box in the table below, whether each of the following statements regarding the preparation of a consolidated statement of financial position is correct.
(1) All intra-group balances should be eliminated
(2) Intra-group profit in year-end inventory should be eliminated
(3) Closing inventory held by subsidiaries needs to be included at fair value

Maxwell owns all the share capital of Knight. The following information is extracted from the individual company statements of financial position as at 31 December 20X1:
Included in Maxwell’s purchase ledger is a balance in respect of Knight of $20,000. The balance on Maxwell’s account in the sales ledger of Knight is $22,000. The difference between those figures is accounted for by cash in transit.

there are no other intra-group balances, what is the carrying amount of the net current assets in the consolidated statement of financial position of Maxwell?

A parent sold goods to its wholly owned subsidiary for $1,800 representing cost plus 20%. At the year-end two-thirds of the goods were still in inventory.

What is the amount of unrealised profit at the year end?

Bass acquired its 70% holding in Miller many years ago. At 31 December 20X7 Miller had inventory with a carrying amount of $15,000 purchased from Bass at cost plus 25%.

What are the effects on non-controlling interest and retained earnings in the consolidated statement of financial position after dealing with the consolidation adjustment required for inventory?

(Select your answer using the rectangular buttons)

Tazer, a parent, acquired Lowdown, an unincorporated entity, for $2.8m. A fair value exercise performed on Lowdown’s net assets at the date of purchase showed:
How should the purchase of Lowdown be reflected in Tazer’s consolidated statement of financial position?

Green Co acquired 70% of Blue Co on 1 January 20X4. At 31 December 20X4 the equity of both companies was as follows:
At the date of acquisition, the fair value of Blue Co's net assets is $40m and goodwill is calculated to be $25m. At 31 December 20X4, 20% of this goodwill is to be written off due to impairment. Non-controlling interests are measured at fair value.

What amount should be shown for consolidated retained earnings in the statement of financial position as at 31 December 20X4? (Answer in $m to one decimal place in the Answer box)

Pater Co acquired 80% of the issued equity share capital of Sono Co on 1 May 20X1, when the balance on Sono Co's retained earnings was $520,000.

On 15 November 20X8, Sono Co made $240,000 sales of goods to Pater Co, on which Sono Co made a mark-up (on cost) of 20%. Pater Co subsequently sold one-quarter of these goods to external parties prior to 31 December 20X8.

At 31 December 20X8, the retained earnings of Pater Co and Sono Co were $4m and $3.4m respectively.

What retained earnings should be reported in Pater Co's consolidated statement of financial position as at 31 December 20X8 (to the nearest $000) (Answer to nearest $000 in the Answer box)

The correct answer is

A 60% owned subsidiary sold goods to its parent for $150,000 at a mark-up of 25% on cost during the year ended 30 June 20X5. One fifth of these goods remained unsold as at 30 June 20X5.

What is the debit adjustment to be made to group retained earnings to reflect the unrealised profit in inventory at 30 June 20X5?

Witch Co acquired 70% of the 200,000 equity shares of Wizard Co, its only subsidiary, on 1 April 20X8 when the retained earnings of Wizard Co were $450,000. The carrying amounts of Wizard Co's net assets at the date of acquisition were equal to their fair values.

Witch Co measures non-controlling interest at fair value, based on share price. The market value of Wizard Co shares at the date of acquisition was $1.75.

At 31 March 20X9 the retained earnings of Wizard Co were $750,000. At what amount should the non-controlling interest appear in the consolidated statement of financial position of Witch Co at 31 March 20X9?

Cloud Co obtained a 60% holding in the 100,000 $1 shares of Mist Co on 1 January 20X8. Cloud Co paid $250,000 cash immediately with an additional $400,000 payable on 1 January 20X9 and one share in Cloud Co for each two shares acquired. Cloud Co has a cost of capital of 8% and the market value of its shares on 1 January 20X8 was $2.30.

What was the total consideration paid for Cloud Co's share of Mist Co?

On 1 June 20X1, Premier Co acquired 80% of the equity share capital of Sandford Co. At the date of acquisition the fair values of Sandford Co's net assets were equal to their

carrying amounts with the exception of its property. This had a fair value of $1.2 million BELOW its carrying amount. The property had a remaining useful life of eight years.

What effect will any adjustment required in respect of the property have on group retained earnings at 30 September 20X1?

On 1 August 20X7, Patronic Co purchased 18 million of the 24 million $1 equity shares of Sardonic Co. The acquisition was through a share exchange of two shares in Patronic Co for every three shares in Sardonic Co. The market price of a share in Patronic Co at 1 August 20X7 was $5.75. Patronic Co will also pay in cash on 31 July 20X9 (two years after acquisition) $2.42 per acquired share of Sardonic Co. Patronic Co's cost of capital is 10% per annum.

What is the amount of the consideration attributable to Patronic Co for the acquisition of Sardonic Co?

On 1 April 20X0, Picant Co acquired 75% of Sander Co's equity shares by means of a share exchange and an additional amount payable on 1 April 20X1 that was contingent upon the post-acquisition performance of Sander Co. At the date of acquisition Picant Co assessed the fair value of this contingent consideration at $4.2 million but by 31 March 20X1 it was clear that the amount to be paid would be only $2.7 million.

Using the drag and drop options below, demonstrate how Picant Co would account for this $1.5 million adjustment in its financial statements as at 31 March 20X1?

Account

(1) Current liabilities Debit /Credit

(2) Goodwill Credit /Debit

(3) Retained earnings Debit /Credit

Crash Co acquired 80% of Bang Co's 100,000 $1 ordinary shares for $800,000 when the retained earnings of Bang Co were $570,000.

Bang Co also has an internally developed customer list which has been independently valued at $90,000.

The directors of Crash Co are deciding whether to recognise non-controlling interest at fair value or at its share of the net assets of Bang Co at the date of acquisition. The fair value of the non-controlling interest in Bang Co was judged to be $220,000 at the date of acquisition.
What was the goodwill arising on the acquisition of Bang Co if the NCI is measured at fair value or as a proportionate share of the net assets at acquisition?

(1) Fair value

(2) Share of net assets

Tazer Co, a parent company, acquired Lowdown Co, an unincorporated entity, for $2.8 million. A fair value exercise performed on Lowdown Co's net assets at the date of purchase showed:

How should the purchase of Lowdown be reflected in Tazer Co's consolidated statement of financial position?

Pratt Co acquired two subsidiaries in the year ended 31 December 20X5. Pratt Co values non-controlling interests at fair value.

On 1 January 20X5, Pratt Co acquired 80% of the equity shares of Sam Co. Goodwill at the date of acquisition was correctly calculated as $20,000. The goodwill of Sam Co was not impaired in the year ended 31 December 20X5.

In reviewing the fair value of Sam Co's net assets at acquisition, Pratt Co concluded that property, plant and equipment, with a remaining life of five years, had a fair value of $5,000 in excess of its carrying amount.

On 1 April 20X5, Pratt Co acquired 75% of the equity shares of Tait Co. Goodwill at the date of acquisition was correctly calculated as $50,000. At 31 December 20X5, the goodwill in Tait Co was impaired by 40%.

Sam Co has not incorporated these adjustments into its individual financial statements.

What is the total charged to group retained earnings at 31 December 20X5 as a result of these consolidation adjustments?

Brim has owned 100% of the issued share capital of Stone for many years. Brim sells goods to Stone at cost plus 20%. The companies’ revenues for the year were:

(1)Brim (1) $460,000

(2) Stone (2) $120,000

During the year Brim sold goods to Stone for $60,000, of which $18,000 were still held in inventory by Stone at the year end.

Orwell is the sole subsidiary of George. The cost of sales figures for 20X1 for George and Orwell were $11m and $10m respectively. During 20X1 George sold goods which had cost $2m to Orwell for $3m. Orwell has not yet sold any of these goods.
What is the consolidated cost of sales figure for 20X1?

Cooper owns 80% of Essen. Essen sells goods to Cooper at cost plus 50%. The total invoiced sales to Cooper by Essen in the year ended 31 December 20X1 were $900,000 and, of these sales, goods which had been invoiced at $60,000 were held in inventory by Cooper at 31 December 20X1.

What is the adjustment for unrealised profit in the consolidated profit or loss for the year ended 31 December 20X1?

Cherry owned 75% of Plum. For the year ended 31 December 20X1 Plum reported a net profit of $118,000. During 20X1 Plum sold goods to Cherry for $36,000 at cost plus 50%. At the year-end these goods are still held by Cherry.

What is the non-controlling interest in the consolidated statement of profit or loss for the year ended 31 December 20X1? (Answer in $ in the Answer box)

Hot owns 80% of the issued share capital of Warm and 40% of the issued share capital of Cold. In the individual company financial statements the tax charges for the year are:

$

(1) Hot (1)40,000

(2)Warm (2)36,000

(3) Cold (3)20,000

What is the tax charge in the consolidated statement of profit or loss? (Answer in $ in the Answer box)

Cornish Co purchased 80% of Pasty Co a number of years ago for $164,000. During the year ended 31 December 20X6 Cornish Co disposed of its entire investment in Pasty Co for $275,000. On disposal, the net assets of Pasty Co were measured at $186,000 and non-controlling interest amounted to $37,000. Goodwill remaining at the disposal date, in respect of the purchase, was $29,000.

What is the profit on disposal which will be recorded in Cornish Co’s CONSOLIDATED statement of profit or loss for the year ended 31 December 20X6?

On 1 July 20X5, Pull Co acquired 80% of the equity of Sat Co. At the date of acquisition, goodwill was valued at $10,000 and the non-controlling interest was measured at fair value.

In conducting the fair value exercise on Sat Co’s net assets at acquisition, Pull Co concluded that property, plant and equipment with a remaining life of ten years had a fair value of $300,000 in excess of its carrying amount. Sat Co had not incorporated this fair value adjustment into its individual financial statements. At the reporting date of 31 December 20X5, the goodwill was fully impaired. For the year ended 31 December 20X5, Sat Co reported a profit for the year of $200,000.

What is the Pull Group profit for the year ended 31 December 20X5 that is attributable to non-controlling interests? (Answer in $ in the Answer box)

Pearl Co has controlled an 80% owned subsidiary, Silver Co, for many years. Silver Co sold goods to Pearl Co for $120,000 at a mark-up of 20% during the year.

Pearl Co had sold half of these goods by the year end.

Which of the following statements regarding intra-group transactions in the consolidated financial statements are true or false?
(1) Revenue must be reduced by a total of $120,000
(2) Cost of sales must be reduced by a total of $110,000
(3) Non-controlling interest must be reduced by $2,000

Hillusion Co acquired 80% of Skeptik Co on 1 July 20X2. In the post-acquisition period Hillusion Co sold goods to Skeptik Co at a price of $12 million. These goods had cost Hillusion Co $9 million. During the year to 31 March 20X3 Skeptik Co had sold $10 million (at cost to Skeptik Co) of these goods for $15 million.

How will this affect group cost of sales in the consolidated statement of profit or loss of Hillusion Co for the year ended 31 March 20X3?

Which of the following statements is a realistic conclusion that could be drawn from the

above information?

Which TWO of the following statements are true, based on the information provided?

Which of the following statements concerning the use of ratio analysis to make a decision

about investing in A or B is FALSE?

If LOP acquired B, it has assessed that combining the two companies would lead to an overall

saving in cost of sales of $5 million.

If this was taken into account, what would be the gross margin of LOP combined with B to

one decimal place?

Calculate Franck’s return on capital employed (based on profit from operations) without

the acquisition of Duik to one decimal place.

What is the combined operating margin if Franck and Duik are combined?

Which of the following is NOT a factor to consider in respect of Duik being a subsidiary of

another entity?

What other information is NOT likely to be available to Franck before entering into

negotiations for the acquisition of Duik?