On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31 December 2015 Ausra Danute $ 000 $ 000 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 - 54,920 16,000 Current assets Inventory 11,240 6,450 Receivables 13,600 7,355 Bank 5,160 2,195 30,000 16,000 Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each 40,000 4,000 Retained earnings 17,720 8,800 Revaluation reserve 7,200 - 64,920 12,800 Non-current liabilities 10% loan notes - 10,000 Current Liabilities 20,000 9,200 Total Equity and Liabilities 84,920 32,000 The following information is relevant: The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute’s financial statements. Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation). On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer. During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute were reconciled at the year end with Danute owing $50,000. Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million. An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000. Required: Prepare a consolidated Statement of Comprehensive Income and Statement of Financial Position for Ausra for the year to 31 December 2015.

On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31 December 2015 Ausra Danute $ 000 $ 000 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 - 54,920 16,000 Current assets Inventory 11,240 6,450 Receivables 13,600 7,355 Bank 5,160 2,195 30,000 16,000 Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each 40,000 4,000 Retained earnings 17,720 8,800 Revaluation reserve 7,200 - 64,920 12,800 Non-current liabilities 10% loan notes - 10,000 Current Liabilities 20,000 9,200 Total Equity and Liabilities 84,920 32,000 The following information is relevant: The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute’s financial statements. Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation). On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer. During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute were reconciled at the year end with Danute owing $50,000. Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million. An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000. Required: Prepare a consolidated Statement of Comprehensive Income and Statement of Financial Position for Ausra for the year to 31 December 2015.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Statement of Comprehensive Income for the year ended 31 December 2015

	Ausra	Danute
	$ 000	$ 000
Revenue	120,000	48,000
Cost of sales	(84,000)	(40,000)
Gross profit	36,000	8,000
Operating expenses	(11,900)	(400)
Profit from operations	24,100	7,600
Other income	300	-
Finance costs	-	(1,200)
Profit before tax	24,400	6,400
Income tax expense	(6,000)	(1,200)
Profit for the year	18,400	5,200

Statements of Financial Position at 31 December 2015

	Ausra	Danute
	$ 000	$ 000
Non-current assets:
Property, plant and equipment	38,640	16,000
Investments	16,280	-
	54,920	16,000
Current assets
Inventory	11,240	6,450
Receivables	13,600	7,355
Bank	5,160	2,195
	30,000	16,000
Total Assets	84,920	32,000
Equity and liabilities
Ordinary shares of $1 each	40,000	4,000
Retained earnings	17,720	8,800
Revaluation reserve	7,200	-
	64,920	12,800
Non-current liabilities
10% loan notes	-	10,000
Current Liabilities	20,000	9,200

Total Equity and Liabilities	84,920	32,000

The following information is relevant:

The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute’s financial statements.

Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation).

On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer.

During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute were reconciled at the year end with Danute owing $50,000.

Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million.

An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000.

Required:

Prepare a consolidated Statement of Comprehensive Income and Statement of Financial Position for Ausra for the year to 31 December 2015.

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