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MN acquired 80% of the equity shares in LK on 1 January 20X6. The consideration for the acquisition consisted of the following
•Cash of $2.400,000 paid on 1 January 20X6
•Cash of $1,000,000 paid on 1 January 20X8 (a discount rate of 7% was applied to value the liability in the financial statements of MN) and
The transfer of 1500,000 shares in MN with a nominal value of $1 each and an agreed value on the date of acquisition of $2 each
The best estimate of the fair value of the consideration to be included in the calculation of goodwill arising on the acquisition of LK?
Excuse me sir ,
Can you give me some idea how to solve this question ??The statement of financial position of A plc and B ltd as at 31 December 20X7 are as follows.
A plc B ltd
£ £Assets
Non-current assets
Property, plant and equipment 145,000 50,000
Investments 53,000 ‘
198,000 50,000
Current assets
Inventories 40,000 30,000
Trade receivables 45,000 20,100
Cash at bank 17,000 9,900
102,000 60,000Total assets 300,000 110,000
Equity and liabilities
Equity
Ordinary shares (£1 each) 100,000 40,000
Retained earnings 90,000 32,000
190,000 72,000Non-current liabilities
5% Long-term loans 70,000 20,000Current liabilities
Trade payables 40,000 18,000Total equity and liabilities 300,000 110,000
Additional information:1. The investment by A plc in B ltd was as follows.
£
30,000 ordinary shares of £1 each 44,000
5% Long-term loans 9,000
53,000The ordinary shares were acquired when the retained earnings of B ltd were £12,000. Since acquisition, there has been no impairment of goodwill.
2. A remittance of £1,500 sent by A plc to B ltd on 30 December 20X7 was not recorded in the books of B ltd until 4 January 20X8.
3. Goods had been sold at normal selling price by B ltd to A plc during the year. The total sales of such goods during the year were £80,000. The inventory of A plc at 31 December 20X7 contained goods purchased from B ltd at a selling price of £16,000. B ltd earns 20% profit margin on its sales to A plc.
4. At the year-end there was no liability outstanding in respect of loan interest payable.
5. The trade receivables of B Ltd includes £2,500 owed by A plc and the trade payables of A plc includes £1,000 owed to B ltd.
6. It is the group’s policy to value non-controlling interest at acquisition at its fair value. The non-controlling interest was valued at £14,667 on 31 December 20X7.
Required:
Prepare a consolidated statement of financial position for A plc at 31 December 20X7.There is no point in simply typing out full questions and expecting to be provided with a full answer!!!
You must have answers in the same book in which you found the questions, and so ask about whatever it is in the answer that you are not clear about and then I will explain.
Everything needed to be able to answer the questions in explain in our free lectures, and you cannot expect me to type out my lectures again here 🙂
(As far as the second of these two questions is concerned, you obviously cannot be asked to produce a full consolidated SOFP in the exam. However you can be asked to calculate individual figures from the SOFP.)
MN acquired 80% of the equity shares in LK on 1 January 20X6. The consideration for the acquisition consisted of the following
•Cash of $2.400,000 paid on 1 January 20X6
•Cash of $1,000,000 paid on 1 January 20X8 (a discount rate of 7% was applied to value the liability in the financial statements of MN) and
The transfer of 1500,000 shares in MN with a nominal value of $1 each and an agreed value on the date of acquisition of $2 each
The best estimate of the fair value of the consideration to be included in the calculation of goodwill arising on the acquisition of LK?
Excuse me sir ,
Can you give me some idea how to solve this question ??This question could not be asked in Paper FA (because of the mention of the discount rate).
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