Question
P Co and S Co The following are the draft statement of Financial Position of P Co and its subsidiary S Co as at 31st
P Co and S Co
The following are the draft statement of Financial Position of P Co and its subsidiary S Co as at 31st December 2019 are given below:
P Co | S Co | |
Assets | $ | $ |
Non current assets | ||
Tangible assets | 350,000 | 160,000 |
Investments: in S Co | 154,000 | |
Current assets | ||
Inventories | 40,000 | 20,000 |
Trade receivables | 100,000 | 85,000 |
Cash and cash equivalents | 20,000 | 15,000 |
Total Assets | 664,000 | 280,000 |
Equity and liabilities | ||
Share capital: Ordinary $1 shares | 350,000 | 100,000 |
Retained earnings | 180,000 | 88,000 |
Non- current liabilities: | ||
6% Loan | 50,000 | 20,000 |
Current liabilities | ||
Trade and other payables | 84,000 | 72,000 |
Total Equity & Liabilities | 664,000 | 280,000 |
Additional information:
- P Co acquired 80000 shares in S Co on 1st Jan 2019 for a cost of $ 154,000 when the retained earnings of S Co were $ 30,000.
- The fair value of the non-controlling interest in S Co at the date of acquisition was $50,000.
- At the date of acquisition, the fair value of the net assets of S Co approximated their carrying amounts, except for a plot of land owned by S Co. This land was held in the financial statements of S Co at its cost of $100,000 but was estimated to have a fair value of $150,000. This land is still owned by S Co at 31st December 2019.
- At 31st December 2019, S Co sold goods to P Co for $ 40,000 at a mark -up of 25%. 50% of these goods were still unsold by P Co at the end of the year.
- At 31st December 2019, P Co owed S Co $ 24,000 for goods bought and this debt is included in the trade payable of P Co and the trade receivable of S Co.
Question 1
You are required to:
- Prepare consolidate statement of financial position as at 31st December 2019 of P Cos.
(Provide Reference to IFRS wherever applicable, relevant workings including journal entry for unrealized profit)
- Relevant workings & presentation
- Consolidated statement of financial position
B. Evaluate the adjustment of provision for unrealized profit if:
At 31st December 2019, P Co sold goods to S Co for $ 40,000 at a Margin of 25%. 50% of these goods were still unsold by S Co at the end of the year.
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