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PFPeer Far6y ago
hello ACCA FR Chapter 23 Consolidated statement of financial position Questions Question 2 0f 10 the question On 31 March, 2014 when Code plc acquired 65% of the 3,000,000 $1 equity shares of Dole plc, the retained earnings of Code plc and Dole plc were $2,720,000 and $1,940,000 respectively and the market value of the Dole plc shares was $2,60 The carrying amounts of the Dole plc net assets were approximately equal to their fair values with the exception of a parcel of land that had a fair value $650,000 greater than its carrying value. The terms of the acquisition were that Code plc would issue 2 new shares in Code plc for every 5 shares acquired in Dole plc and would pay $1.20 for each share acquired. In addition Code plc would issue a $100 7% Unsecured Loan Note for every 390 shares acquired The Code plc shares had a market value as at date of acquisition of $2.80. Code plc has decided to measure the non-controlling interest at fair value with the Dole plc share price being a reasonable indication of fair value At 31 December, 2014 the retained earnings of Code plc and Dole plc were $2,690,000 and $1,780,000 respectively. Goodwill is not impaired At what amount should the non-controlling interest be shown in the consolidated statement of financial position for the Code plc group as at 31 December, 2014? (Answer to the nearest $000) This is the answer: 1,050,000 x 82.60 = 2,730,000 retained earnings (1,940,000 - 1,760,000) x 35% = ( 56,000) nci @ 31 December 2014 1,050,000 x 82.60 = 2,730,000 retained earnings (1,940,000 - 1,760,000) x 35% = ( 56,000) I have calculated this: 1,050,000 x 82.60 = 2,730,000 but i cannot deal with the other information given in the question. I have tried relating to the explanation in the lectures and notes but to no avail. This is unlike the first question on the online test where i was able to remove the extra depreciation and therefore adjust the fair value of NCI aquisition.
P2-D2P2-D2Tutor6y ago#1
OK, so you've got the NCI at fair value at acquisition, so that's a good start. I think your 82.60 should be $2.60 but that's a minor point. To this you then need to add on the share of post acquisition profits, which is where the answer is right but looks wrong?!?!?! I think the (56,000) is correct but I think it should be calculated as follows: 35% x (1,780,000 RE @ y/e - 1,940,000 RE @ acqn) = (56,000) Hope that helps clear it up. Thanks
PFPeer Far6y ago#2
yes that is easy and i miss that. I guess that the other parts of the question does not affect REtained earnings . Am I right?
P2-D2P2-D2Tutor6y ago#3
Don't forget that the post-acquisition retained earnings will also be used in the group retained earnings calculation where the group will record its share. Thanks
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