Assignment Scenario 1

Pearl Co and Stone Co

The following are the draft statement of Financial Position of Pearl Co and its subsidiary Stone Co as at 31st December 20 20 are given below:

	Pearl Co	Stone Co
Assets	RO	RO
Non current assets
Tangible assets	1713000	230000
Investments: Stone Co	450000
Current assets
Inventories	661800	226800
Trade receivables	871200	422100
Cash and cash equivalents	180000	226350
Total Assets	3876000	1105250
Equity and liabilities
Share capital :Ordinary RO1 shares	2250000	450000
Share premium		56250
Retained earnings	336000	140000
Non- current liabilities:
6% Loan	255000	180000
Current liabilities
Trade and other payables	1035000	279000
Total Equity & Liabilities	3876000	1105250

Additional information:

1. Pearl Co acquired 315000 shares in Stone Co on 1^st Jan 2020 for a cost of RO 450,000 when the retained earnings of Stone Co were RO 30,000. The fair value of the non-controlling interest in Stone Co at the date of acquisition was RO 120,000.
2. At the date of acquisition, the fair value of the net assets of Stone Co approximated their carrying amounts, except for a plot of land owned by Stone Co. This land was held in the financial statements of Stone Co at its cost of RO 50,000 but was estimated to have a fair value of RO70,000. This land is still owned by Stone Co at 31st December 2020.
3. At 31^st December 2020 Stone Co sold goods to Pearl Co for RO 24,000 at a mark-up of 25% . 25% of these goods were still unsold by Pearl Co at the end of the year.
4. At 31^st December 2019 Stone Co s trade receivables include RO 75,000 due from Pearl Co and Pearl Co s trade payable include RO 75,000 due to Stone Co.

Question 1

A. You are required to:

Prepare consolidate statement of financial position as at 31^st December 2020 of Pearl Co .

(Provide Reference to IFRS wherever applicable and relevant workings)

(Relevant workings 3 marks + consolidated statement of financial position 4 marks)

B. An asset is sold in two different active markets at different prices. An entity enters into transaction in both markets and can access the price in those markets for the assets at measurement date as follows.

Amount in RO

	Market 1	Market 2
Price	78,000	75,000
Transaction cost	(6,000)	(2,000)
Transportation cost	(4,000)	(4,000)
Net price received	68,000	69,000

Briefly discuss fair value as per IFRS 13 concept & evaluate the fair value of the asset if :

i) The market one is the principal market for the asset

ii) No principal market can be determined .

answer question 1 A and B

in A make sure you calculate all the workings

in B write 500 words with calculation