The Consolidated Statement of Financial Position

 

Electra is a small publicly listed company and on 1 April 20X8 it acquired 90% of the equity shares in Helios, a private limited company. On the same date Electra accepted a 10% loan note from Helios for $200,000 which was repayable at $40,000 per annum (on 31 March each year) over the next 5 years. Helios’ retained earnings at the date of acquisition were

$2,200,000.

STAMENTS OF FINANCIAL POSITION AS AT 31 MARCH 20X9

 

	ELECTRA		HELIOS
	$’000	$’000	$’000	$’000
Assets
Non-current assets
Property          plant          & equipment		2,120		1,990
Intangible: Software		-		1,800
Investments:    Equity     in Helios		4,110		-
10% loan note Helios		200		-
Other		65		210
		6,495		4,000
Current Assets
Inventories	719		560
Trade receivables	524		328
Helios current account	75		-
Cash	20	1,338	-	888
Total Assets		7,833		4,888
Equity & Liabilities
Equity
Equity shares of $1 each	2,000		1,500
Share Premium	2,000		500
Retained Earnings	2,900	6,900	1,955	3,955
Non –current liabilities
10% loan from Electra	-		160
Government Grant	230		40	200

 

Current Liabilities
Trade payables	475		472
Electra current account	-		60
Income taxes payable	228		174
Operating overdraft	-	703	27	733
Total Equity & Liabilities		7,833		7,833

 

 

Notes:

• Included in Helios property at the date of acquisition was a leasehold property recorded at its depreciated historical cost of $400,000. On 1 April 20X8 the leasehold property was sublet for its remaining life of four years at an annual rental of $80,000 payable in advance on 1 April each year. The directors of Electra are of the opinion that the fair value of this leasehold property is best reflected by the present value of its future cash flows. An appropriate cost of capital for the group is 10% per annum. The present value of $1 annuity received at the end of each year where interest rates are 10% can be taken as:

$

• year annuity                    2,50
• year annuity                    3,50
• The software of Helios represents the depreciation cost of the development of an integrated business accounting package. It was completed at a capitalized cost of

$2,400,000 and went on sale on April 1 20X7. Helios directors are depreciating the software on a straight line basis over an eight-year life (i.e. $300,000 per annum). However the directors of Electra are of the opinion that a five year life would be more appropriate as sales of business software rarely exceed this period.

• The inventory of Electra on 31 March 20X9 contains goods at a transfer price of

$25,000 that were supplied by Helios who had marked them up with a profit of 25% on cost. Unrealized profits are adjusted for against the profit of the company that made them.

• On 31 March 20X9 Helios remitted to Electra a cash payment of $55,000. This was not received by Electra until early April. It was made up of an annual repayment of the 10% loan note of $40,000 (interest had been already paid) and $15,000 on the current account balance.
• Goodwill is reviewed for impairment annually. At 31 March 20X9 there was an impairment loss of $120,000 in value of goodwill since acquisition.

Required:

 

Prepare the consolidated statement of the financial position of Electra as at 31 March 20X9.