P Ltd bought 80% of S Ltd’s equity shares on 1 January 2016. On thedate of the purchase of S Ltd's shares, among other things, S Ltd'sstatement of financial position contains the following:$Retained profit72,000Tangible non-current assetsCost288,000Fair value360,000On the date of acquisition (of S Ltd's shares) by P Ltd, S Ltd's assetswere not revalued to fair value.It is part of S Ltd's accounting policy to depreciate non-current assetson a straight-line basis for 10 years.The income statements of P Ltd and S Ltd for the year ended 31December 2020 are as follows:P LtdS Ltd$$Revenue240,000168,000Cost of sales144,00024,000Gross profit96,000144,000Expenses12,00014,400Depreciation and amortizationOperating profit24,00028,80060,000100,8009,60050,400Income tax2,400Net profit98,400Reserves (brought forward)Reserves (carried forward)240,000168,000290,400 266,400Note: P Ltd and S Ltd are considered to be in the same group for the purpose offinancial reporting. Required:Compile a consolidated statement of profit or loss for P Ltd's groupfor the year ended 31 December 2020. Please be reminded thatin the consolidated statement of profit or loss, you must clearlyconsider or include:the extra depreciation charge owing to any difference as regardsthe original costs of assets and their fair values;'non-controlling interest’ (NCI); andnet profit that is only attributable to the group (i.e. afterdeducting NCI).Note: reserves brought forward of S Ltd is determined to be $53,760b Explain what goodwill is in the context of HKFRS 3 and if therecognition of goodwill is generally considered a straightforwardmatter.

Consolidated income statement is a statement which presents the income, expenses, revenues of the…

Required: a Compile a consolidated statement of profit or loss for P Ltd's group for the year ended 31 December 2020. Please be reminded that in the consolidated statement of profit or loss, you must clearly consider or include: the extra depreciation charge owing to any difference as regards the original costs of assets and their fair values; 'non-controlling interest’ (NCI); and net profit that is only attributable to the group (i.e. after deducting NCI). Note: reserves brought forward of S Ltd is determined to be $53,760 b Explain what goodwill is in the context of HKFRS 3 and if the recognition of goodwill is generally considered a straightforward matter.

Required: a Compile a consolidated statement of profit or loss for P Ltd's group for the year ended 31 December 2020. Please be reminded that in the consolidated statement of profit or loss, you must clearly consider or include: the extra depreciation charge owing to any difference as regards the original costs of assets and their fair values; 'non-controlling interest’ (NCI); and net profit that is only attributable to the group (i.e. after deducting NCI). Note: reserves brought forward of S Ltd is determined to be $53,760 b Explain what goodwill is in the context of HKFRS 3 and if the recognition of goodwill is generally considered a straightforward matter.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Unicorn Ltd acquired 80% of the issued shares of Pegasus Ltd for $685,700 on 1 July 2020. The financial statements of Pegasus Ltd showed the following items of equity: Share capital $565,500 Retained earnings $247,400 At acquisition date all the identificable assets and liabilities of Pegasus Ltd were recorded at amounts equal to fair value except for the following: Carrying amount Fair value Land $395,900 $424,100 During the year end 30 June 2021, Pegasus Ltd recorded at profit of $84,800. The tax rate is 30%. Required: Show the acquisition analysis as at 1 July 2020 and prepare the consolidated worksheet entries at 30 June 2021 for Unicorn Ltd assuming that it adopts the partial goodwill method.
On 1 July 2020, Sky Ltd acquired 70% of the share capital (ex. div.) of Jim Ltd for $500,000. At that date, the relevant balances in the records of Jim Ltd were: Share capital General reserve Retained earnings Dividend payable S 434,000 35,000 126,000 14,000 At the date of acquisition all assets and liabilities of Jim Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets: Carrying amount Fair value Land Machine 56,000 30,800 Land was sold on 1 May 2023 for $77,000. $ 67,200 49,000 The cost of the Machine was $58,800 and had a further 5-year life as at the date of acquisition. Jim Ltd had reported a Contingent liability at 1 July 2020 in relation to claims by customers for damaged goods. Sky Ltd placed a fair value of $12,600 on these claims at acquisition date. This claim was settled on 1 April 2023 for $7,000. Additional information: a) On 1 March 2023, Jim Ltd purchased inventory from Sky Ltd for $25,200,…
Mokwena Limited acquired 48% investment in Masibi Limited at R100 000. At the date of acquisition, which is 31 March 2016, Masibi Limited's statement of financial position showed the following balances: Non-current assets R692 000 Current assets R44 000 Non-current liabilities R268 000 Current liabilities R218 000 Mokwena Limited applies equity accounting for all its investments in associates and joint ventures. The financial year-end for Mokwena Limited is on 31 March of each year. Assuming that Mokwena Limited acquired the 48% in Masibi Limited at R125 000 instead of R100 000. What amount will be recorded as investment in associate in Mokwena Limited's statement of financial position as at 31 March 2016? Select one: O a. R125 000 O b. R120 000 O . R250 000 O d. R100 000
Sailor Berhad acquired all the shares in Mon Berhad on 31 December 2022 for a cost of RM900,000. The statement of financial poistion of both companies for the year ended 31 December 20221 were as follows: Non-current assets Investment in Mon Berhad at cost Current assets Ordinary share Retained earnings Current liabilities Sailor Berhad RM'000 1,600 900 380 2,880 1,000 1,580 300 2,880 Mon Berhad RM'000 750 300 1,050 500 300 250 1,050 Required: Explain by way of calculation on how to prepare the consolidated statement of financial position for the group as at 31 December 2022.
On 1 January 2018, Chelsea Ltd acquired 75% of the shares in Orlando Ltd at N$126 000. At that date, the balance on Orlando Ltd’s retained earnings account amounted to N$36 000. The share capital amounted to N$120 000 and no shares have been issued since that date.The following are the condensed financial statements of Chelsea Ltd and subsidiary OrlandoLtd at 31 December 2020.STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2020Chelsea LtdN$Orlando LtdN$ASSETSProperty, plant and equipment 168 000 105 000Investment in Orlando Ltd at fair value 180 000 -Trade receivables 87 000 156 000Total assets 435 000 261 000EQUITY AND LIABILITIESShare capital 240 000 120 000Mark-to-market reserve 54 000 -Retained earnings 54 000 54 000Long-term borrowings 30 000 6 000Trade and other payables 57 000 81 000Total equity and liabilities 435 000 261 000EXTRACT FROM THE STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020Chelsea LTDN$Orlando LTDN$Profit 55 500…
Hlayisani Ltd acquired 60% of the voting shares of the Mashele Ltd on 31 January 2014 for R65 000 when the items of equity in the books of Mashele Ltd on that date were retained income of R45 000, revaluation surplus of R10 000 and share capital of R58 000. Calculate the amount of goodwill/ (gain on bargain purchase) realized by Hlayisani Ltd on 31 January 2014. 7 300 -- 99- 10
On 1 July 2013 Donald Ltd acquired all of the share capital (cum div) of Duck Limited for a consideration of $600,000 cash and a brand that was held in their accounts at a fair value of $50,000. Duck Ltd reported a dividend payable of $8,000 at 1 July 2013. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $18,000.The land was sold on 30/12/16 for $90,000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Duck Ltd consisted of: Share capital 420000 General reserve 90000 Retained earnings 70000 Assume a tax rate of 30%. Required A. Prepare the acquisition analysis at 1 July 2013.B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013.C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017. Answer all the subparts A,B,C .if…
On 3 May 2016, Mashego Limited acquired 75% (and control) of Mahlangu Limited's outstanding ordinary shares for R112 000. The fair value of the non-controlling interest was equal to a proportionate share of the book value of Mahlangu Limited's net assets at the date of acquisition. The selected balance sheet data for the two companies as at 30 April 2016 are as follows: Mashego Mahlangu Limited Limited R R Total assets 504 000 216 000 Liabilities 144 000 72 000 Ordinary shares 120 000 60 000 Retained earnings 240 000 84 000 Equity & liabilities 504 000 216 000 What amount should be recorded as non-controlling interest in the net assets of Mahlangu Limited in the consolidated statement of financial position of Mashego Limited at 30 April 2016? Select one: O a. R90 000 O b. R54 000 O C R36 000 O d. R108 000
Nick Ltd acquired 100% of the issued capital of Wing Ltd on 1 July 2011 for $270000. The statements of financial position of the companies immediately after the acquisition are provided below. All assets have been reported following fair value. Statement of Financial Position For the year ended 1 July 2011 Nick Ltd Wing Ltd Shareholders' equity Share capital General reserve Retained earnings Total shareholders' equity 450,000 45,000 140,000 635,000 180,000 25,000 20,000 225,000 Assets Current assets Cash at Bank Accounts Receivable 50,000 20,000 100.000 170,000 30,000 10,000 25.000 65,000 Inventory Non-current assets Investment in Wing Ltd Land Plant & Equipment 270,000 250,000 100,000 620.000 790.000 200,000 80.000| 280.000 345.000 Total assets Liabilities Current liabilities Accounts Payable Interest Payable 40,000 10,000 15.000 L.000 55,000 18,000 Non-current liabilities Bank loan Total liabilities Net assets 100,000 155,000 635,000 102,000 120,000 225,000 Required 1. Calculate…
On 1 January 2011, Berardo Ltd acquired 25% of the ordinary issued share capital of Ricky Ltd for $750 000. This investment gave rise to significant influence. The share capital and reserves of Ricky Ltd at 1 January 2011 were: Share capital 800,000 General reserve 500,000 Retained earnings 550,000 Total 1,850,000 All the identifiable net assets of Ricky Ltd were stated at fair value at the date of acquisition except for a building whose carrying value was $100 000 less than the fair value. Implicit goodwill arising on Berardo's acquisition of Ricky was: A) $262,500 B) $270,000 C) $287,500 D) $300,000
On 3 May 2016, Mashego Limited acquired 75% (and control) of Mahlangu Limited's outstanding ordinary shares for R112 000. The fair value of the non-controlling interest was equal to a proportionate share of the book value of Mahlangu Limited's net assets at the date of acquisition. The selected balance sheet data for the two companies as at 30 April 2016 are as follows: Mashego Mahlangu Limited Limited R R Total assets 504 000 216 000 Liabilities 144 000 72 000 Ordinary shares 120 000 60 000 Retained earnings 240 000 84 000 Equity & liabilities 504 000 216 000 What amount should be recorded as investment in subsidiary in the separate statement of financial position for Mashego Limited at 30 April 2016? Select one: O a. R108 000 O b. R112 000 O C R144 000 O d. R216 000
On 1 July 2020, Kent Ltd acquired all the share capital (Ex-dividend) of Sub Ltd for $500,000. The financial statements of Kent Ltd showed the equity of Sub Ltd at that date to be: Share capital — 60 000 $5 shares $300 000 General reserve 40 000 Retained earnings 90 000 All the assets and liabilities of Sub Ltd were recorded at amounts equal to their fair values at that date except the following: Carrying Amount Fair value Land $150 000 $170 000 Plant (Cost $400 000) $300 000 $350 000 Inventory $75 000 $80 000 Additional information: On 10 September 2020, Sub Ltd paid interim cash dividend of $10,000. At acquisition date, 1 July 2020, Sub Ltd has an unrecorded Patent that has a fair value of $20,000, and a Contingent Liability that has a fair value of $15 000. Plant has expected to have a further 5-year life. The tax rate…