Question
Parent plc acquired 80% of the ordinary share capital of Subsidiary plc on 1 January 2009 for 900 $. Share Capital and retained earnings were
Parent plc acquired 80% of the ordinary share capital of Subsidiary plc on 1 January 2009 for 900 $. Share Capital and retained earnings were 600 $ and 400 $ respectively in the subsidiary as the acquisition date. In arriving at the consideration for the shares in Subsidiary the fair value of its PPE were agreed at $ 10 below the book value (5 year remaining life to compute excess acquisition date fair value amortization) and goodwill was impaired by 20 % during 2009 Goodwill calculated using the full goodwill method.
The statements of comprehensive income for P and S for the year ended 31 December 2010 are as follows:
|
| Parent $ | Subsidiary $ |
| Revenue | 2940 | 1020 |
| Cost of sales | (1210) | (560) |
| Gross profit | 1730 | 460 |
| Distribution cost | (200) | (100) |
| Operating expenses | (350) | (60) |
| Interest Expense | (80) | (20) |
| Dividend Revenue from Subsidiary | 40 | 0 |
| Profit before tax | 1140 | 280 |
| Income tax expense | (180) | (68) |
| Net income | 960 | 212 |
During 2010, Parent sold inventory to Subsidiary for 420 including a mark-up of 25% on cost. 25% of this was included in the inventory of Subsidoary remains unsold as at 31 December 2010.
Also at 1 January 2009, Parent sold a PPE to Subsidiary for 70 Sold PPE had a cost of $ 100 and $40 accumulated depreciation. P depreciates this asset over its remaining 5 year life (including a full year of depreciation in the year of purchase) using the straight-line method of depreciation.
Prepare the consolidated statement of comprehensive income for the year ends 31 December 2010.Impairment and depreciation expenses are charged to operating expenses
Remember: goodwill calculations are always done at acquisition date!
Prepare a consolidated income statement for year ending 31/12/2010 and record all necessary entries
Consolidated Statement of comprehensive income for P and S Group for year ended 31 December 2010
|
| P | S |
| Group |
| Revenue | 2940 | 1020 |
|
|
| Cost of Goods sold | (1210) | (560) |
|
|
| Gross profit |
|
|
|
|
| Distribution cost | (200) | (100) |
|
|
| Operating expenses | (350) | (60) |
|
|
| Finance costs | (80) | (20) |
|
|
| Dividend from Subsidiary | 40 | 0 |
|
|
| Profit before tax |
|
|
|
|
| Income tax expense | (180) | (68) |
|
|
| Net income |
|
|
|
|
| Net income attributable to controlling interest (owners of parent) |
|
|
|
|
| Net income attributable to Non-controlling interest |
|
|
|
|
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Managing Business Ethics Making Ethical Decisions
Authors: Alfred A. Marcus, Timothy J. Hargrave
1st Edition
1506388590, 978-1506388595
