CSFP

TEST 2

KFC acquired 306.4M $1 shares of the ordinary shares of JAVA on 1 July 2018 when the retained earnings of JAVA stood at $ 150m. KFC paid $ 650m Cash, and made a share-to-share exchange of three shares for every five shares received in JAVA. KFC further promised to pay 32M in three years time. The cost of capital is 10%. KFC has only recorded cash paid in respect of the investment in JAVA. The market price of KFCs shares at the time of acquisition was $1.80 and that of JAVA was at $1.20

Below are the statements of financial position of KFC and JAVA as of 30 June 2021

	KFC	JAVA
	$000	$000
Non-Current Assets
Land	50,000	350,000
Plant& Equipment	416,500	208,250
Investments	650,000
	1,116,500	558,250
Current Assets
Inventory	360,000	180,000
Receivables	485,000	242,500
Cash/ Bank	6,350	3,175
	851,350	425,675
Total Assets	1,967,850	983,925
Share capital $1	766,000	383,000
Share premium	14,850	7,425
Retained Earnings	763,000	381,500
	1,543,850	771,925
12% loan note	300,000	150,000
Current Liabilities	124,000	62,000
	424,000	212,000
Total Equity & Liabilities	1,967,850	983,925

The following information is relevant.

1. At the time of acquisition, the fair value of JAVAs plant exceeded its book value by $58m. The plant had a remaining useful life of five years at this date.
2. For many years, JAVA has been selling some of its products under the brand name of MRight. At the date of acquisition, the directors of KFC decided to value this brand at 54m with a remaining useful life of 9 years. The internally generated brand is not included in JAVAs statement of financial position.
3. The consolidated goodwill has been impaired by $ 100m
4. The KFC group uses the fair value method to value the NCI. At the date of acquisition, the fair value of the NCI stood at $20m

Required;

Prepare the consolidated statement of financial position as at 30 June 2021.

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