Question 4.3: P Co acquired 75% of the shares in S Co on 1 January 20X2 wh...

FIA – Foundations of Financial Accounting FFA

P Co acquired 75% of the shares in S Co on 1 January 20X2 when the retained earnings of S Co stood at $10,000. The fair value of the non-controlling interest at the date of acquisition was $15,000. During the year to 31 December 20X2, S Co sold goods to P Co for $20,000 at a mark-up of 25%. 50% of these goods were still unsold by P Co at the end of the year. At the same date, P Co owed S Co $12,000 for goods bought and this debt is included in the trade payables of P Co and the trade receivables of S Co.

Draft statements of financial position of each company at 31 December 20X2 were as follows.

Required
Prepare a draft consolidated statement of financial position for P Co.

	P Co		S Co
	$	$	$	$
Assets
Non-current assets
Tangible assets	80,000			40,000
Investment in S Co at cost	46,000
Current assets		126,000
Trade receivables	30,000		25,000
Inventories	10,000		5,000
		40,000		30,000
Total assets		166,000		70,000
Equity and liabilities
Equity
Ordinary shares of $1 each	100,000		30,000
Retained earnings	45,000		22,000
		145,000		52,000
Current liabilities
Trade payables		21,000		18,000
Total equity and liabilities		166,000		70,000

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P CO
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X2

	$	$
Assets
Non-current assets
Tangible assets (80,000+ 40,000)		120,000
Goodwill (W1)		21,000
Current assets
Trade receivables (30,000+ 25,000-12,000)	43,000
Inventories (10,000+5,000- 2,000(W2))	13,000
		56,000
Total assets		197,000

Equity and liabilities
Equity attributable to owners of the parent
Ordinary shares of $1 each	100,000
Retained earnings (W3)	52,500
		152,000
Non-controlling interest (W4)		17,500
		170,000
Current liabilities (21,000 + 18,000-12,000)		27,000
Total equity and liabilities		197,000

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