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The statements of financial position of P Co and of its subsidiary S Co have been made up to 30 June.
P Co has owned all the ordinary shares and 40% of the loan stock of S Co since its incorporation.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE
P Co S Co
$ $
Assets
Non-current assets
Property, plant and equipment 120,000 100,000
Investment in S Co, at cost
80,000 ordinary shares of $1 each 80,000
$20,000 of 12% loan stock in S Co 20,000
220,000
Current assets
Inventories 50,000 60,000
Receivables 40,000 30,000
Current account with S Co 18,000
Cash 4,000 6,000
112,000 96,000
Total assets 332,000 196,000
Equity and liabilities
Equity
Ordinary shares of $1 each, fully paid 100,000 80,000
Retained earnings 95,000 28,000
195,000 108,000
Non-current liabilities
10% loan stock 75,000
12% loan stock 50,000
Current liabilities
Payables 47,000 16,000
Taxation 15,000 10,000
Current account with P Co 12,000
62,000 38,000
Total equity and liabilities 332,000 196,000
The difference on current account arises because of goods in transit.
Required
Prepare the consolidated statement of financial position of P Co.I have a question about the 12% loan stock . why it was recorded in consolidated FS like this 12% loan stock 50000x 60%=30000 but in above it was said that we only acquired 40% of the 12% loan. I calculated 50000*40%=20000.
Thanks for attentionI have another question about cash in transit.
why in this example cash in transit added to cash in consolidated FS but wouldn’t be deducted from the receivables. why? because double entry is that Dr cash Cr receivables
During the process of consolidation we eliminate any figures that lie within the group
Thus, in this question, we own 40% of the loan stock, so that is eliminated leaving 60% of that loan stock to be shown as a liability within the consolidated figures
OK?
I see no cash in transit! I see goods in transit with a value of $6,000
How come you’re asking about cash in transit … am I missing something?
cash is transit is deducted both from cash an d receivables right? Yeah it is only goods in transit
goods in transit is shown in this example under the current asset like this
Goods in transit(18000-12000)=6000
but we know that goods in transit’s double entry Dr Inventories Cr Account payable
According second question I dont still understand that if we own 40% of the loan stock why we added 60% to the consolidated FS. how can we behave with the strange fiqure in our consolidated statement
No, cash in transit is deducted from receivables but it is ADDED to cash
No we don’t know that double entry!
There is NO double entry that affects Inventory that doesn’t also affect … inventory!
The double entry to record goods in transit is:
Dr Inventory (statement of financial position)
Cr Cost of goods sold (statement of profit or loss)We’re canceling the related items
So if the parent owns 40% of the loan stock, we’re canceling 40% of the loan stock
That means that there is still 60% of the loan stock that is owned by outside lenders and that’s why the figure for loan stock in the figure for current liabilities is reduced by that 40%
OK?
Aaaaa that is clear?? 40% we owned and the reamining portion is still our liability. Perfect.
Thanks a lot.
And cash in transit is also deducted from AR and added cash simultaneously?
And inventory in transit double entry always like that : DR Inventory CR COS
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