On 1 April 2019, DBT Ltd acquired 60% of the equity share capital of SMT Ltd in a share exchange of two shares in DBT for three shares in SMT. At that date the retained earnings of SMT were P5 million. The issue ofshares has not yet been recorded by DBT. At the date of acquisition shares in DBT had a market value of P6each. Below are the summarised draft statements of financial position of both companies.

STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2019

DBT Ltd SMT Ltd

Assets P'000 P'000

Non-current assets

Property, plant and equipment 40,600 12,600

Current assets 16,000 6,600

Total assets 56,600 19,200

Equity and liabilities

Equity shares of P1 each 10,000 6,000

Retained earnings 35,400 6,500

45,400 12,500

Non-current liabilities

10% loan notes 3,000 4,000

Current liabilities 8,200 2,700

Total equity and liabilities 56,600 19,200

The following information is relevant.

At the date of acquisition, the fair values of SMT assets were equal to their carrying amounts with the

exception of an item of plant, which had a fair value of P2 million in excess of its carrying amount. It had a

remaining life of five years at that date (straight-line depreciation is used). SMT has not adjusted the

carrying amount of its plant as a result of the fair value exercise.

Sales from SMT to DBT in the post-acquisition period were P8 million. Sophistic made a mark up on

cost of 40% on these sales. DBT had sold P5.2 million (at cost to DBT) of these goods by

30 September 2019.

SMT trade receivables at 30 September 2019 include P600,000 due from DBT which did not agree

with DBT corresponding trade payable. This was due to cash in transit of P200,000 from DBT to

SMT. Both companies have positive bank balances.

DBT has a policy of accounting for any non-controlling interest at full fair value. The fair value of the non-controlling interest in SMT at the date of acquisition was estimated to be P5.9 million. Consolidated

goodwill was not impaired at 30 September 2019.

Required

1. Prepare the consolidated statement of financial position for DBT as at 30 September 2019. [38]