8 1 Mercury Group consists of a holding company, Mercury pic, two subsidiaries and one associate company. The extracts consolidated financial statements for the Group for the year ended 31 December 2020 are as follows: 2020 2019 E'000 '000 Consolidated statement of profit or loss and other comprehensive income (extracts) Net Income for the period attributable to: Owners of the parent 19,760 Non-controlling interest 1,750 Total comprehensive income attributable to: Owners of the parent 21,010 Non-controlling interest 1,990 Consolidated statement of financial position (extracts) Retained earnings 49,250 31,960 Non-controlling interest 2,300 2,400 Dividends payable 1,149 980 The additional information pertaining to the consolidated financial statements are as follows: (1) During the year, Mercury disposed of a subsidiary for a total consideration received of 7,500,000. The consideration was settled by receiving financial assets with a fair value of 1,500,000 and the remaining balance was received in cash. The carrying amount of the net assets of the subsidiary at the date of disposal was 6,290,000 (which include a cash and cash equivalent balance of 750,000). The carrying amount of non-controlling interest was 1,980,000. (2) Dividends payable presented in the consolidated statement of financial position consists of dividends payable to the owners of the parent 962,000 (2019: 812,000) and dividends payable to non-controlling interest 187,000 (2019: 168,000). Requirements Calculate the cash flow associated with the below items which would be presented in the consolidated statement of cash flows for Mercury Group for the year ended 31 December 2020: (a) (6) (c) net cash received from disposal of the former subsidiary dividends paid to the owners of the parent dividends paid to non-controlling interest (8 marks) 9 During the year ended 31 December 2020, Mercury plc has made the following foreign currency transactions. Mercury designated E as its functional currency. The relevant exchange rates are as follows: 1 January 2020 1 = DM6.5 Transaction date (purchase equipment) 1 = DM6.7 Lump sum settlement date 1 = DM7.3 31 December 2020 1 = DM6.9 January 2021 1 = DM7.1 (1) Mercury purchased equipment worth DM800,000 from a foreign vendor on credit during the year ended 2020. 75% of the credit purchases were settled during the year in a lump sum payment while the remaining balance was subsequently settled in January 2021. (2) Mercury purchased 3 million ordinary shares of another entity of DM1 each at DM1.80 per share on 1 January 2020. These shares represent 10% of the total ordinary shares of the issuing entity, which is a foreign entity. These shares are traded in a foreign stock exchange and are quoted in foreign currency, DM. Mercury's accounting policy is to measure this investment in equity instruments at fair value with any fair value changes recognised in other comprehensive income. As at the end of 2020, the market price of these shares decreased to DM1.20 per share. Requirement Explain how the above foreign currency transactions should be accounted for in the consolidated financial statements of Mercury Group for the year ended 31 December 2020. (6 marks) (Total 14 marks) END 8 1 Mercury Group consists of a holding company, Mercury pic, two subsidiaries and one associate company. The extracts consolidated financial statements for the Group for the year ended 31 December 2020 are as follows: 2020 2019 E'000 '000 Consolidated statement of profit or loss and other comprehensive income (extracts) Net Income for the period attributable to: Owners of the parent 19,760 Non-controlling interest 1,750 Total comprehensive income attributable to: Owners of the parent 21,010 Non-controlling interest 1,990 Consolidated statement of financial position (extracts) Retained earnings 49,250 31,960 Non-controlling interest 2,300 2,400 Dividends payable 1,149 980 The additional information pertaining to the consolidated financial statements are as follows: (1) During the year, Mercury disposed of a subsidiary for a total consideration received of 7,500,000. The consideration was settled by receiving financial assets with a fair value of 1,500,000 and the remaining balance was received in cash. The carrying amount of the net assets of the subsidiary at the date of disposal was 6,290,000 (which include a cash and cash equivalent balance of 750,000). The carrying amount of non-controlling interest was 1,980,000. (2) Dividends payable presented in the consolidated statement of financial position consists of dividends payable to the owners of the parent 962,000 (2019: 812,000) and dividends payable to non-controlling interest 187,000 (2019: 168,000). Requirements Calculate the cash flow associated with the below items which would be presented in the consolidated statement of cash flows for Mercury Group for the year ended 31 December 2020: (a) (6) (c) net cash received from disposal of the former subsidiary dividends paid to the owners of the parent dividends paid to non-controlling interest (8 marks) 9 During the year ended 31 December 2020, Mercury plc has made the following foreign currency transactions. Mercury designated E as its functional currency. The relevant exchange rates are as follows: 1 January 2020 1 = DM6.5 Transaction date (purchase equipment) 1 = DM6.7 Lump sum settlement date 1 = DM7.3 31 December 2020 1 = DM6.9 January 2021 1 = DM7.1 (1) Mercury purchased equipment worth DM800,000 from a foreign vendor on credit during the year ended 2020. 75% of the credit purchases were settled during the year in a lump sum payment while the remaining balance was subsequently settled in January 2021. (2) Mercury purchased 3 million ordinary shares of another entity of DM1 each at DM1.80 per share on 1 January 2020. These shares represent 10% of the total ordinary shares of the issuing entity, which is a foreign entity. These shares are traded in a foreign stock exchange and are quoted in foreign currency, DM. Mercury's accounting policy is to measure this investment in equity instruments at fair value with any fair value changes recognised in other comprehensive income. As at the end of 2020, the market price of these shares decreased to DM1.20 per share. Requirement Explain how the above foreign currency transactions should be accounted for in the consolidated financial statements of Mercury Group for the year ended 31 December 2020. (6 marks) (Total 14 marks) END