Accounting question On 1 April 2015, ROAALTO acquired of the equity share capital of PKFUTDPKF LTD had been kperiencing dimul trading conditions and making significant losses in allowing for PRF LTD'S difficulties, ROAA LTD made an immediate cash payment of only G6 1.50 per share. In addition, ROMA LTD will pay a further amount in cash on 30 September 2020 PKF LTD returns to profitability bay that date. The value of this contingent consideration at the date of acquisition was estimated to be GHS 1.8 million, but at 30 September 2019 in the light of continuing losses, its value was estimated at only GHS 15 million. The contingent consideration has not been recorded by ROAA LTD. Overall, the directors of ROAALTO expect the acquisition to be a bargain purchase leading to negative goodwill At the date of acquisition shares in PKF LTD had a listed market price GHS 1.20 each Below are the summarized draft financial statements of both companies. Statements of profit or loss for the year ended 30 September 2019 ROAA LTD PKF LTD GHS '000 GHS '000 Revenue 110,000 65,000 Cost of sales (88,000) (67,200) 22,000 (1,200) Gross profit (los) Distribution costs Administrative expenses (3.000) (2,000) 15,250) 12,400) Finance costs (250) nil 13,500 Profit (loss) before tax Income tax (expense/relief (5,600) (3,500) 1,000 Profit (loss) for the year 10,000 (4,600) Statements of financial position as to be 19 Assets Property, plant and equipment 41.000 DO Finale: equity investments (note 16.000 57.000 21.000 Current assets 16.500 4 DO Totalsts 73,500 25.000 Equity and liabilities Equity Equity shares of 50 pesewas each Retained earnings 30,000 6.000 28,500 12,000 58.500 18.000 Current liabilities 15,000 7,800 Total equity and liabilities 73,500 25,800 The following information is relevant: At the date of acquisition, the fair values of PKF LTD's assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GHS 2 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales. (ii) ROAA LTD transferred raw materials at their cost of GHS 4 million to PKF LTD in June 2019. PKF LTD processed all of these materials incurring additional direct costs of GHS 14 million and sold them back to ROAA LTD in August 2019 for GHS 9 million. At 30 September 2019 ROAA LTD had GHS 1.5 million of these goods still in inventory. There were no other intra-group sales. ROAA LTD has recorded its investment in PKF LTD at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2018. The other equity investments have fallen in value by GHS 200,000 during the year ended 30 September 2019. ROAA LTD's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, PKF LTDs share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. (V) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. Required: (a) Prepare the consolidated statement of profit or loss for ROAALTD for the year ended 30 September 2019 (b)Prepare the consolidated statement of financial position for ROAA LTD as at 30 September 2019. QUESTION 1 On 1 April 2019, ROAA LTD acquired 75% of the equity share capital of PKF LTD. PKF LTD had been experiencing difficult trading conditions and making significant losses. In allowing for PKF LTD's difficulties, ROAA LTD made an immediate cash payment of only GHS 1-50 per share. In addition, ROAA LTD will pay a further amount in cash on 30 September 2020 if PKF LTD returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be GHS 1-8 million, but at 30 September 2019 in the light of continuing losses, its value was estimated at only GHS 1.5 million. The contingent consideration has not been recorded by ROAA LTD. Overall, the directors of ROAALTD expect the acquisition to be a bargain purchase leading to negative goodwill.At the date of acquisition shares in PKF LTD had a listed market price of GHS 1-20 each Below are the summarized draft financial statements of both companies Statements of profit or loss for the year ended 30 September 2019 Revenue Cost of sales Gross profit (loss) Distribution costs Administrative expenses Finance costs Profit (loss) before tax Income tax (expense)/relief Profit (loss) for the year ROAA LTD PKFLTD 110,000 66,000 -B8.000 22,000 -1,200 -3,000 -2,000 -5,250 -2.400 -250 _nil 13.500 -5,600 -3.500 1.000 10,000 -4,600 Statements of financial position as at 30 September 2019 Assets Non-current assets Property, plant and equipment Financial asset: equity investments (note (iii) 21,000 41.000 16000 57.000 16.500 73,500 21,000 25,800 Current assets Total assets Equity and liabilities Equity Equity shares of 50 pese was each Retained earnings 30,000 28.500 58,500 15.000 73,500 6,000 12.000 18.000 7.800 25,800 Current liabilities Total equity and liabilities The following information is relevant: At the date of acquisition, the fair values of PKF LTD's assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GHS 2 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales ROAA LTD transferred raw materials at their cost of GHS 4 million to PKF LTD in June 2019. PKF LTD processed all of these materials incurring additional direct costs of GHS 14 million and sold them back to ROAA LTD in August 2019 for GHS 9 million. At 30 September 2019 ROAA LTD had GHS 1.5 million of these goods still in inventory. There were no other intra-group sales. ROAA LTD has recorded its investment in PKF LTD at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2018. The other equity investments have fallen in value by GHS 200,000 during the year ended 30 September 2019. (V) ROAALTD's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, PKF LTDs share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest (v) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. Required (a) Prepare the consolidated statement of profit or loss for ROAA LTD for the year ended 30 September 2019 (b) Prepare the consolidated statement of financial position for ROAALTD as at 30 September 2019. Accounting question On 1 April 2015, ROAALTO acquired of the equity share capital of PKFUTDPKF LTD had been kperiencing dimul trading conditions and making significant losses in allowing for PRF LTD'S difficulties, ROAA LTD made an immediate cash payment of only G6 1.50 per share. In addition, ROMA LTD will pay a further amount in cash on 30 September 2020 PKF LTD returns to profitability bay that date. The value of this contingent consideration at the date of acquisition was estimated to be GHS 1.8 million, but at 30 September 2019 in the light of continuing losses, its value was estimated at only GHS 15 million. The contingent consideration has not been recorded by ROAA LTD. Overall, the directors of ROAALTO expect the acquisition to be a bargain purchase leading to negative goodwill At the date of acquisition shares in PKF LTD had a listed market price GHS 1.20 each Below are the summarized draft financial statements of both companies. Statements of profit or loss for the year ended 30 September 2019 ROAA LTD PKF LTD GHS '000 GHS '000 Revenue 110,000 65,000 Cost of sales (88,000) (67,200) 22,000 (1,200) Gross profit (los) Distribution costs Administrative expenses (3.000) (2,000) 15,250) 12,400) Finance costs (250) nil 13,500 Profit (loss) before tax Income tax (expense/relief (5,600) (3,500) 1,000 Profit (loss) for the year 10,000 (4,600) Statements of financial position as to be 19 Assets Property, plant and equipment 41.000 DO Finale: equity investments (note 16.000 57.000 21.000 Current assets 16.500 4 DO Totalsts 73,500 25.000 Equity and liabilities Equity Equity shares of 50 pesewas each Retained earnings 30,000 6.000 28,500 12,000 58.500 18.000 Current liabilities 15,000 7,800 Total equity and liabilities 73,500 25,800 The following information is relevant: At the date of acquisition, the fair values of PKF LTD's assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GHS 2 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales. (ii) ROAA LTD transferred raw materials at their cost of GHS 4 million to PKF LTD in June 2019. PKF LTD processed all of these materials incurring additional direct costs of GHS 14 million and sold them back to ROAA LTD in August 2019 for GHS 9 million. At 30 September 2019 ROAA LTD had GHS 1.5 million of these goods still in inventory. There were no other intra-group sales. ROAA LTD has recorded its investment in PKF LTD at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2018. The other equity investments have fallen in value by GHS 200,000 during the year ended 30 September 2019. ROAA LTD's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, PKF LTDs share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. (V) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. Required: (a) Prepare the consolidated statement of profit or loss for ROAALTD for the year ended 30 September 2019 (b)Prepare the consolidated statement of financial position for ROAA LTD as at 30 September 2019. QUESTION 1 On 1 April 2019, ROAA LTD acquired 75% of the equity share capital of PKF LTD. PKF LTD had been experiencing difficult trading conditions and making significant losses. In allowing for PKF LTD's difficulties, ROAA LTD made an immediate cash payment of only GHS 1-50 per share. In addition, ROAA LTD will pay a further amount in cash on 30 September 2020 if PKF LTD returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be GHS 1-8 million, but at 30 September 2019 in the light of continuing losses, its value was estimated at only GHS 1.5 million. The contingent consideration has not been recorded by ROAA LTD. Overall, the directors of ROAALTD expect the acquisition to be a bargain purchase leading to negative goodwill.At the date of acquisition shares in PKF LTD had a listed market price of GHS 1-20 each Below are the summarized draft financial statements of both companies Statements of profit or loss for the year ended 30 September 2019 Revenue Cost of sales Gross profit (loss) Distribution costs Administrative expenses Finance costs Profit (loss) before tax Income tax (expense)/relief Profit (loss) for the year ROAA LTD PKFLTD 110,000 66,000 -B8.000 22,000 -1,200 -3,000 -2,000 -5,250 -2.400 -250 _nil 13.500 -5,600 -3.500 1.000 10,000 -4,600 Statements of financial position as at 30 September 2019 Assets Non-current assets Property, plant and equipment Financial asset: equity investments (note (iii) 21,000 41.000 16000 57.000 16.500 73,500 21,000 25,800 Current assets Total assets Equity and liabilities Equity Equity shares of 50 pese was each Retained earnings 30,000 28.500 58,500 15.000 73,500 6,000 12.000 18.000 7.800 25,800 Current liabilities Total equity and liabilities The following information is relevant: At the date of acquisition, the fair values of PKF LTD's assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GHS 2 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales ROAA LTD transferred raw materials at their cost of GHS 4 million to PKF LTD in June 2019. PKF LTD processed all of these materials incurring additional direct costs of GHS 14 million and sold them back to ROAA LTD in August 2019 for GHS 9 million. At 30 September 2019 ROAA LTD had GHS 1.5 million of these goods still in inventory. There were no other intra-group sales. ROAA LTD has recorded its investment in PKF LTD at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2018. The other equity investments have fallen in value by GHS 200,000 during the year ended 30 September 2019. (V) ROAALTD's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, PKF LTDs share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest (v) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. Required (a) Prepare the consolidated statement of profit or loss for ROAA LTD for the year ended 30 September 2019 (b) Prepare the consolidated statement of financial position for ROAALTD as at 30 September 2019