Question 1 Below are the statements of financial position for Elsa Plc, Anna Limited, Sven Limited and Olaf Co for the year ended 30 April 2020. Anna Elsa 000 Sven 000 000 Olaf R000 27,950 11,150 3,500 45,000 Non Current Assets Property, Plant and Equipment Development Expenditure Investments 2,500 3,000 33,450 1,650 12,800 275 250 4,025 2,000 500 47,500 4,225 7,315 1,525 2,338 600 875 11,500 15,000 Current Assets Inventories Trade and Other Receivables Cash and Cash Equivalents 1,255 1,162 225 4,500 12,795 46,245 5,025 17,825 1,700 5,725 31,000 78,500 Total Assets Equity Ordinary Share Capital Preference Share Capital Retained Earnings 2,000 625 15,000 7,500 2,500 9,290 19,290 7,050 9,050 1,600 2.225 6,000 21,000 Non Current Liabilities Borrowings Provisions 4,000 18,000 12,500 1,500 14,000 500 1,200 300 1,500 4,500 18,000 Current Liabilities Borrowings Trade and Other Payables Current Taxation 2,500 8,455 2,000 12,955 1,000 2,525 750 4,275 450 1,300 250 2,000 2,500 25,000 12,000 39,500 Total Liabilities Total Equity and Liabilities 26,955 46,245 8,775 17,825 3,500 5,725 57,500 78,500 Notes to the Statement of Financial Position 1 i) Share Capital All ordinary shares other than those in Olaf have a par value of 50 pence All preference shares have a par value of 1 and the preference dividend rate on all preference shares is 6% All preference shares are redeemable at par in 10 years time Ordinary shares in Olaf have a par value of R1. Olaf is a company incorporated in Reenland and its accounts are denominated in Reenlandian Rand (R) ii) Exchange Rates prevailing during the year Average Rate for the year: 1 = R17.5 Opening Rate at 1 May 2019: 1 = R15 Closing Rate at 30 April 2020: 1 = R20 iv) Anna Limited Elsa purchased 3,200,000 ordinary shares on 1 May 2019. The purchase consideration consisted of 2 shares in Elsa Plc and 1 in cash for every 4 shares in Anna. The double entry for the cash element of the transaction has been recorded in cash and in Elsa's investments but the accountant has not recorded the number or value of shares issued nor the value of shares issued in Elsa's investments. At the date of acquisition ONE share in Elsa was valued at 4.50 At the date of acquisition the retained earnings of Anna stood at 5,000,000 At the date of acquisition it was agreed that the book values of the assets and liabilities of Anna did not differ materially from the fair values for those assets and liabilities Group policy is to capitalise development expenditure under the requirements of IAS38. Anna has a long-term development project in hand which at 30 April 2020 had incurred total expenditure of 1,200,000 all of which had been charged to the income statement in line with the UK accounting standard SSAP13 even though the criteria for capitalisation of this expenditure had been met under IAS38. Calculations indicate that the development expenditure incurred up to 30 April 2019 amounted to 1,050,000 Anna paid an interim dividend of 200,000 on 1 December 2019 and declared a final dividend of 350,000 on 28 April 2020 Half the preference dividend was paid on 31 October 2019 and the directors declared the final preference dividend on 28 April 2020 iii) Elsa Pic Elsa's investments include an interest free loan to Olaf of 500,000 which is repayable in 10 years time. This loan was made to Olaf when the :R exchange rate was 1 = R18 and the loan is still in Olaf's books at this historical cost exchange rate It is the group's policy to value any non-controlling interests at their proportionate share of the fair value of the subsidiary's identifiable net assets 2 3 Elsa has taken credit for its share of the dividends from Anna in the statement of financial position above. All dividends receivable from Anna by Elsa are included in Trade and Other Receivables All dividends payable are included in Trade and Other Payables . v) Sven Limited Elsa acquired 500,000 shares in Sven Limited on 1 January 2020 for 950,000 At 30 April 2019, the retained earnings of Sven stood at 1,300,000 At the date of acquisition it was agreed that the book values of the assets and liabilities of Sven did not differ materially from the fair values for those assets and liabilities On 28 April 2020, Sven declared a final dividend for the year of 10 pence per share and paid an interim dividend of 40,000 on 1 December 2019 Elsa has not taken account of the dividend receivable from Sven in the statement of financial position above Olaf sold goods to Elsa throughout the year to 30 April 2020 at cost plus a mark-up of 25%. At the year end, the goods purchased from Olaf, Elsa still held R1,000,000 of it. The directors have decided to calculate any provision for unrealised profit based on the closing exchange rate at the year end Elsa sent Olaf a payment of 60,000 on 28 April 2020 to clear the current account balances between the two companies at the year end. Olaf received this payment on 10 May 2020 and has not taken account of this payment in its statement of financial position above Olaf declared a final dividend for the year ended 30 April 2020 of R500,000 on 17 May 2020. Elsa and Anna have taken no account of this dividend in their statement of financial position above. The exchange rate at 17 May 2020 continued to be 1 = R20 . vii) Goodwill Positive goodwill is carried at cost and is reviewed annually for impairment vi) Olaf Elsa paid 700,000 to acquire 28% of the shares in Olaf on 1 May 2019. On the same date Anna paid 1,600,000 to acquire 40% of the shares in Olaf At 30 April 2019 Olaf's retained earnings stood at R5,000,000 At the date of acquisition it was agreed that the fair value of Olaf's buildings was R12,000,000 higher than book value. These buildings had an average remaining useful economic life of 30 years at the date of acquisition Negative goodwill is credited directly to retained earnings An impairment review of goodwill had been carried out at the year end and had concluded that there had been no impairment of the goodwill associated with any of the investee companies YOU ARE REQUIRED TO: Prepare the group statement of financial position for Elsa Plc at 30 April 2020. . All your calculations should be made to the nearest 000. 4 5 YOU ARE REQUIRED TO: Prepare the group statement of financial position for Elsa Plc at 30 April 2020. All calculations should be made to the nearest 000. TOTAL 60 MARKS Question 1 Below are the statements of financial position for Elsa Plc, Anna Limited, Sven Limited and Olaf Co for the year ended 30 April 2020. Anna Elsa 000 Sven 000 000 Olaf R000 27,950 11,150 3,500 45,000 Non Current Assets Property, Plant and Equipment Development Expenditure Investments 2,500 3,000 33,450 1,650 12,800 275 250 4,025 2,000 500 47,500 4,225 7,315 1,525 2,338 600 875 11,500 15,000 Current Assets Inventories Trade and Other Receivables Cash and Cash Equivalents 1,255 1,162 225 4,500 12,795 46,245 5,025 17,825 1,700 5,725 31,000 78,500 Total Assets Equity Ordinary Share Capital Preference Share Capital Retained Earnings 2,000 625 15,000 7,500 2,500 9,290 19,290 7,050 9,050 1,600 2.225 6,000 21,000 Non Current Liabilities Borrowings Provisions 4,000 18,000 12,500 1,500 14,000 500 1,200 300 1,500 4,500 18,000 Current Liabilities Borrowings Trade and Other Payables Current Taxation 2,500 8,455 2,000 12,955 1,000 2,525 750 4,275 450 1,300 250 2,000 2,500 25,000 12,000 39,500 Total Liabilities Total Equity and Liabilities 26,955 46,245 8,775 17,825 3,500 5,725 57,500 78,500 Notes to the Statement of Financial Position 1 i) Share Capital All ordinary shares other than those in Olaf have a par value of 50 pence All preference shares have a par value of 1 and the preference dividend rate on all preference shares is 6% All preference shares are redeemable at par in 10 years time Ordinary shares in Olaf have a par value of R1. Olaf is a company incorporated in Reenland and its accounts are denominated in Reenlandian Rand (R) ii) Exchange Rates prevailing during the year Average Rate for the year: 1 = R17.5 Opening Rate at 1 May 2019: 1 = R15 Closing Rate at 30 April 2020: 1 = R20 iv) Anna Limited Elsa purchased 3,200,000 ordinary shares on 1 May 2019. The purchase consideration consisted of 2 shares in Elsa Plc and 1 in cash for every 4 shares in Anna. The double entry for the cash element of the transaction has been recorded in cash and in Elsa's investments but the accountant has not recorded the number or value of shares issued nor the value of shares issued in Elsa's investments. At the date of acquisition ONE share in Elsa was valued at 4.50 At the date of acquisition the retained earnings of Anna stood at 5,000,000 At the date of acquisition it was agreed that the book values of the assets and liabilities of Anna did not differ materially from the fair values for those assets and liabilities Group policy is to capitalise development expenditure under the requirements of IAS38. Anna has a long-term development project in hand which at 30 April 2020 had incurred total expenditure of 1,200,000 all of which had been charged to the income statement in line with the UK accounting standard SSAP13 even though the criteria for capitalisation of this expenditure had been met under IAS38. Calculations indicate that the development expenditure incurred up to 30 April 2019 amounted to 1,050,000 Anna paid an interim dividend of 200,000 on 1 December 2019 and declared a final dividend of 350,000 on 28 April 2020 Half the preference dividend was paid on 31 October 2019 and the directors declared the final preference dividend on 28 April 2020 iii) Elsa Pic Elsa's investments include an interest free loan to Olaf of 500,000 which is repayable in 10 years time. This loan was made to Olaf when the :R exchange rate was 1 = R18 and the loan is still in Olaf's books at this historical cost exchange rate It is the group's policy to value any non-controlling interests at their proportionate share of the fair value of the subsidiary's identifiable net assets 2 3 Elsa has taken credit for its share of the dividends from Anna in the statement of financial position above. All dividends receivable from Anna by Elsa are included in Trade and Other Receivables All dividends payable are included in Trade and Other Payables . v) Sven Limited Elsa acquired 500,000 shares in Sven Limited on 1 January 2020 for 950,000 At 30 April 2019, the retained earnings of Sven stood at 1,300,000 At the date of acquisition it was agreed that the book values of the assets and liabilities of Sven did not differ materially from the fair values for those assets and liabilities On 28 April 2020, Sven declared a final dividend for the year of 10 pence per share and paid an interim dividend of 40,000 on 1 December 2019 Elsa has not taken account of the dividend receivable from Sven in the statement of financial position above Olaf sold goods to Elsa throughout the year to 30 April 2020 at cost plus a mark-up of 25%. At the year end, the goods purchased from Olaf, Elsa still held R1,000,000 of it. The directors have decided to calculate any provision for unrealised profit based on the closing exchange rate at the year end Elsa sent Olaf a payment of 60,000 on 28 April 2020 to clear the current account balances between the two companies at the year end. Olaf received this payment on 10 May 2020 and has not taken account of this payment in its statement of financial position above Olaf declared a final dividend for the year ended 30 April 2020 of R500,000 on 17 May 2020. Elsa and Anna have taken no account of this dividend in their statement of financial position above. The exchange rate at 17 May 2020 continued to be 1 = R20 . vii) Goodwill Positive goodwill is carried at cost and is reviewed annually for impairment vi) Olaf Elsa paid 700,000 to acquire 28% of the shares in Olaf on 1 May 2019. On the same date Anna paid 1,600,000 to acquire 40% of the shares in Olaf At 30 April 2019 Olaf's retained earnings stood at R5,000,000 At the date of acquisition it was agreed that the fair value of Olaf's buildings was R12,000,000 higher than book value. These buildings had an average remaining useful economic life of 30 years at the date of acquisition Negative goodwill is credited directly to retained earnings An impairment review of goodwill had been carried out at the year end and had concluded that there had been no impairment of the goodwill associated with any of the investee companies YOU ARE REQUIRED TO: Prepare the group statement of financial position for Elsa Plc at 30 April 2020. . All your calculations should be made to the nearest 000. 4 5 YOU ARE REQUIRED TO: Prepare the group statement of financial position for Elsa Plc at 30 April 2020. All calculations should be made to the nearest 000. TOTAL 60 MARKS
