On 1 April 2015, Para acquired 70% of Sunna’s equity shares paying $205,800. The summarized statements of financial position of the two companies at 31 December 2015 are:
|Property, Plant and Equipment||200||230||1|
|Equity and Liabilities|
|at 1 January 2015||170||120|
|for year ended 31 December 2015||20||20|
|10% Loan Notes||40||5|
|9% Loan Notes||30|
|Total Equity and liabilities||536||321|
At the date of acquisition, Para conducted a fair value exercise on Sunna’s net assets which were equal to their carrying amounts.
Para’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, a share price of Sunna of $2 each is representative of the fair value of the 44,100 shares held by the non-controlling interest.
The following information is relevant.
On 1 May 2015 Sunna transferred an item of plant to Para for $30,000. Its carrying amount at that date was $20,000. The asset had a remaining useful economic life of 5 years.
- The Investments in Parra’s books represents amount for Sunna and outside group.
- The investments in Sunna’s books represents amount for outside group investment.
The inventory of Sunna includes $20,000 of goods purchased from Para at cost plus 30%.
Included in Para’s receivables is $8,000 relating to inventory sold to Sunna during the year. Sunna raised a cheque for $5,000 and sent it to Para on 1 December 2015. Para did not receive this cheque until 3 January 2016.
The loan note in Sunna’s books represents monies borrowed from Para during the year. All of the loan note interest has been accounted for.
An impairment loss of $2,000 is to be charged against goodwill at the year-end.
Prepare the consolidated statement of financial position for Para as at 31 December 2015.
|W1 Group Structure|
|W2 Net assets of investee ( go to W7 first)||Acquisition date||Reporting Date|
|Retained Earning (120 + 20/12 x 3 =125)||125,000||140,000|
|NCI||88200||44,100 x 2|
|Fair value of Sunna’s net asset||205,000|
|W4 Non-Controlling Interest|
|NCI at acquisition||88200|
|NCI share of post acquisition||1900||(211,333 – 205,000)x 30%|
|Impairment Loss||-600||2,000 x 30%|
|W5 Group Retained Earnings ( go to W6 first)|
|RE at Para’s reporting date||190,000||170,000 + 20,000|
|PURP-Inventory ( W6)||(4,615)|
|Post Acquisition share||4,433||(211,333 – 205,000)x 70%|
|Impairment Loss||(1,400)||2,000 x 70%|
|Group Retained Earning||188,418|
|W6 PURP-inventory||4,615||20,000/130 x 30|
|NBV transferred ( 30,000-30,000/5 x 8/12)||26,000|
|NBV before transfered (20,000-20,000/5 x 8/12)||17,333|
|Consolidated Statement of Financial Position|
|Year Ended 31 December 2015|
|Property, Plant and Equipment ( W7)||421,333||200,000+230,000-8,667|
|Investments (256,000 +10,000-205,800-40,00 )||20,200||Note: eliminate group transactions, keep only outside group transaction|
|Inventory ( W6)||59,385||30,000+34,000-4,615|
|Trade Receivables||72,000||40,000 + 40,000 – (5,000 + 3,000)|
|Bank||22,000||10,000 + 7,000 + 5,000|
|Equity and Liabilities|
|Equity Shares||266,000||only parent’ share|
|Group Retained Earning (W5)||188,418|
|Non-Controlling Interest ( W4)||89,500|
|9% Loan Notes||30,000||Note: eliminated 10% loan note because of group loan|
|Total Equity and liabilities||681,918|