Question 1 (40 marks) The draft statements of financial position of PSD Ltd and ZWG Ltd as at 30 June 2019 are as follows. PSD Ltd Rs'000 Rs'000 ZWG Ltd Rs'000 Rs'000 210,500 10.920 103,200 Nil 221,420 103,200 Non-current assets Property, plant and equipment Investment in ZWG Ltd Current assets Inventory Trade receivables Other receivables Cash at Bank Cash in hand Total Assets 61,420 37,840 3,120 1,848 317 54,130 28,980 2,670 Nil 248 104,545 325,965 86,028 189,228 Equity and Liabilities Ordinary share capital of Rs2 Share Premium Retained profits 100,000 40,000 97,145 70,000 7,500 28,250 237,145 105,750 60,000 55,000 Non-current liabilities Debentures Current Liabilities Trade payables Interest payable Tax payable Dividend Payable Bank overdraft Total Equity & Liabilities 11,470 4,800 2,550 10,000 Nil 16,593 5,815 825 2,100 3,145 28,820 325.965 28,478 189.228 You have been provided with the following additional information. 1. PSD Ltd acquired 27.3 million ordinary shares of ZWG Ltd on 1 July 2017. In exchange for every three ordinary shares acquired in ZWG Ltd, PSD Ltd issued two ordinary shares to the shareholders of ZWG Ltd. PSD Ltd also paid Rs0.40 for every share acquired in ZWG Ltd. 2. On 1 July 2017 the market price of each ordinary share in PSD Ltd was Rs3.60 and the market price of each ordinary share of ZWG Ltd was Rs2.75. 3. PSD Ltd recorded only the cash consideration in its books of accounts, for the acquisition of the ordinary shares in ZWG Ltd. 4. The policy of the group is to value non-controlling interest at fair value. 5. On 1 July 2017, the share premium and retained profits of ZWG Ltd amounted to Rs7.5 million and Rs17.65 million respectively. 6. On 1 July 2017, the fair values of the assets of ZWG Ltd were equal to their carrying amount with the exception of an item of machinery. The machine had a carrying amount of Rs5 million and its recoverable amount was Rs3.5 million on 1 July 2017 and on that date the remaining useful life of the machine was 12 years. 7. ZWG Ltd sold a machine to PSD Ltd on 31 December 2018 for an amount of Rs7 million rupees when the carrying amount of the machine was machine was Rs6.1 million before the sale. On the date of sale the machine had a remaining useful life of 6 years. 8. An interim dividend of 4 cents per ordinary share was paid by ZWG Ltd during the financial year ended 30 June 2017. On 17 June 2019, ZWG Ltd declared a final dividend of 6 cents per ordinary share and PSD Ltd has recorded its share of dividends in its books of accounts. 9. PSD Ltd sold goods amounting to Rs1.2 million to ZWG Ltd during the financial year ended 30 June 2019. One third of the total goods sold by PSD Ltd to ZWG Ltd were still in the inventory of ZWG Ltd at 30 June 2019. PSD Ltd sold goods to ZWG Ltd at a mark-up of 40%. 10. ZWG Ltd sold goods to PSD Ltd amounting to Rs650,000 per month during the financial year ended 30 June 2019. ZWG Ltd sold goods to PSD Ltd at a mark -up of 30%. Half of the goods sold by ZWG Ltd to PSD Ltd were still in the inventory of PSD Ltd at 30 June 2019. Required: (a) Prepare the consolidated statement of financial position as at 30 June 2019. (20 marks) IBA AVO 8 7 6 5 3 Question 1 (40 marks) The draft statements of financial position of PSD Ltd and ZWG Ltd as at 30 June 2019 are as follows. PSD Ltd Rs'000 Rs'000 ZWG Ltd Rs'000 Rs'000 210,500 10.920 103,200 Nil 221,420 103,200 Non-current assets Property, plant and equipment Investment in ZWG Ltd Current assets Inventory Trade receivables Other receivables Cash at Bank Cash in hand Total Assets 61,420 37,840 3,120 1,848 317 54,130 28,980 2,670 Nil 248 104,545 325,965 86,028 189,228 Equity and Liabilities Ordinary share capital of Rs2 Share Premium Retained profits 100,000 40,000 97,145 70,000 7,500 28,250 237,145 105,750 60,000 55,000 Non-current liabilities Debentures Current Liabilities Trade payables Interest payable Tax payable Dividend Payable Bank overdraft Total Equity & Liabilities 11,470 4,800 2,550 10,000 Nil 16,593 5,815 825 2,100 3,145 28,820 325.965 28,478 189.228 You have been provided with the following additional information. 1. PSD Ltd acquired 27.3 million ordinary shares of ZWG Ltd on 1 July 2017. In exchange for every three ordinary shares acquired in ZWG Ltd, PSD Ltd issued two ordinary shares to the shareholders of ZWG Ltd. PSD Ltd also paid Rs0.40 for every share acquired in ZWG Ltd. 2. On 1 July 2017 the market price of each ordinary share in PSD Ltd was Rs3.60 and the market price of each ordinary share of ZWG Ltd was Rs2.75. 3. PSD Ltd recorded only the cash consideration in its books of accounts, for the acquisition of the ordinary shares in ZWG Ltd. 4. The policy of the group is to value non-controlling interest at fair value. 5. On 1 July 2017, the share premium and retained profits of ZWG Ltd amounted to Rs7.5 million and Rs17.65 million respectively. 6. On 1 July 2017, the fair values of the assets of ZWG Ltd were equal to their carrying amount with the exception of an item of machinery. The machine had a carrying amount of Rs5 million and its recoverable amount was Rs3.5 million on 1 July 2017 and on that date the remaining useful life of the machine was 12 years. 7. ZWG Ltd sold a machine to PSD Ltd on 31 December 2018 for an amount of Rs7 million rupees when the carrying amount of the machine was machine was Rs6.1 million before the sale. On the date of sale the machine had a remaining useful life of 6 years. 8. An interim dividend of 4 cents per ordinary share was paid by ZWG Ltd during the financial year ended 30 June 2017. On 17 June 2019, ZWG Ltd declared a final dividend of 6 cents per ordinary share and PSD Ltd has recorded its share of dividends in its books of accounts. 9. PSD Ltd sold goods amounting to Rs1.2 million to ZWG Ltd during the financial year ended 30 June 2019. One third of the total goods sold by PSD Ltd to ZWG Ltd were still in the inventory of ZWG Ltd at 30 June 2019. PSD Ltd sold goods to ZWG Ltd at a mark-up of 40%. 10. ZWG Ltd sold goods to PSD Ltd amounting to Rs650,000 per month during the financial year ended 30 June 2019. ZWG Ltd sold goods to PSD Ltd at a mark -up of 30%. Half of the goods sold by ZWG Ltd to PSD Ltd were still in the inventory of PSD Ltd at 30 June 2019. Required: (a) Prepare the consolidated statement of financial position as at 30 June 2019. (20 marks) IBA AVO 8 7 6 5 3