Chapter 21 Consolidated statement of financial position

Sir, i need you help on below Kaplan exam kit question

12) PIKE AND SALMON (page 159)

Pike acquired 75% of the issued share capital of Salmon on 1 January 20X6 for $8,720,000. In
addition, Pike also invested in $1 million of Salmon’s 5% loan notes at par value. An extract
of the financial statements of Pike and Salmon as at 31 March 20X6 is presented below:

Pike Salmon
Equity and liabilities $ 000 $000
Equity
Share capital
Retained earnings 1,290
–––––– ––––––
Total equity 21,680 6,090

Non?current liabilities
5% loan notes 20X9 16,440 11,180
Current liabilities 2,640 1,410
–––––– ––––––
40,760 18,680

The following information is relevant to the preparation of the consolidated financial
statements:

(i) At acquisition, the fair value of land owned by Salmon exceeded its cost by $1,000,000.
This land was still owned at 31 March 20X6.

(ii) During the post?acquisition period, Salmon sold goods to Pike for $500,000, on which
it earned a margin of 10%. 80% of the goods remained in Pike’s inventory at the year
end. At 31 March 20X6 Salmon was still owed half of the total amount invoiced to Pike
for these goods.

(iii) The fair value of the non?controlling interest in Salmon at the date of acquisition was
$2,400,000.

(iv) For the year ended 31 March 20X6, Salmon made a profit after tax of $240,000.

Task 2

(b) Select the formula which correctly calculates the fair value of net assets of Salmon
at the date of acquisition.

The solution given is as below:

All figures are in $000
iii) $4,800 + $1,290 – (3/12 × $240) + $1,000

may i know where did the 4800 come from? If this formula wrong, may i know what is the correct formula?