Consolidation Polestar Statement of Profit or Loss

ACCA December 2013

Copy out the question

P S Adjustments Consolidated

Revenue 110000 33000

CofS (88000) (33600)

Distribution (3000) (1000)

Admin (5250) (1200)

Finance (250) 0

Tax (3500) 500

Copy out the question

P S Adjustments Consolidated

PPE 41000 21000

Investment 16000

CAs 16500 4800

Equity Shares

30000 6000

RetEarns 28500 12000

CLs 15000 7800

Consolidation Format- Goodwill

What did we pay? What did we get?

Date 1 April 2013, 6 months

12000 shares

Acquired 9000 shares, =75%

Paid 9000 x 1.50= 13500

Contingent $1800

Consolidation Format- Goodwill

Paid $15300 + NCIs $3600 = $18900

Received

Shares 6000

Retained earnings, py = 16600

Retained earnings, cy = (2300)

Fair value adjustments = 2000

Goodwill = (3400) on acquisition

Net Assets S

Acq Reporting Date

Post Acq

Shares 6000 6000

Ret earn 14300 12000 (2300)

Plant 2000 2000

Depn (100) (100)

Profit (600) (600)

Group Retained Earnings

P 28500S 3000 x 75% (2250)Contingent Cons 300Goodwill 3400Equity Invs (200)NCIAcq 36003000x 25% (750)

P S Adjustments Consolidated

Revenue 110000 33000 (4000) (9000)

130000

CofS (88000) (33600) 4000 9000 (100) (600)

(109300)

Loss on Invs (200) (200)

Distribution (3000) (1000) (4000)

Admin (5250) (1200) 3400 (3050)

Finance (250) 0 (250)

Tax (3500) 500 (3000)

P S Adjustments ConsolidatedPPE 41000 21000 2000 (100) 63900

Investments 16000 (13500) (200) 2300

CAs 16500 4800 (600) 20700

Equity Shares 30000 6000 4500 (6000) 30000

RetEarns 29750

NCIs 2850

CLs 15000 7800 (300) 22800

Contingency 1500

Polestar c

Cost of sales is greater than revenue, current liabilities are greater than current assets, the fall in the value of the contingency indicates declining confidence that the business will be profitable

Significant intercompany trading

Sales may not be at arms length

There may be centralised functions which will need to be duplicated on purchase

Intercompany liabilities could be ‘settled’, valuable assets transferred up at below value