Question 1: Worked example: Buying a company Draft balance sheets of P Ltd and S Ltd at 31 December 201 are as follows: - You are required to: (a) Prepare the balance sheets as at 31 December 201 and 202 for P Ltd, 5 Ltd and the P Ltd group, reflecting the above information. (b) Prepare the income statements for the year ended 31 December 202 for P Ltd, 5 Ltd and the P Ltd group, reflecting the above information. P Ltd then buys all the shares of S Ltd an 31 December 201 for CU4,000 in cash. In 20X2 P Ltd itself made sales of CU6,000 with costs of CU4,500. S Ltd continued to trade and made sales of CU3,000 with costs of CU1,000. There are no other changes to net assets in 202. i.e. surplus cash POINTS TO BE NOTED: 1 The investment in the shares of SLtd in P Ltd's books has been replaced by the underlying net assets of SLtd. The net assets of S Ltd at the date of acquisition (represented by its share capital and reserves at that date) are cancelled out against the investment in P Ltd's books. 2 As the net assets of 5 Ltd increase post-acquisition (an increase attributable to P Ltd's control of SLtd) this increase has been reflected in net assets and retained earnings. 3 The profits of SLtd are combined with those of P Ltd in the consolidated accounts from the date of acquisition, as post-acquisition profits of the subsidiary are earned under the parent's control. This is also reflected in the consolidated balance sheet, where group retained earnings include S Ltd's post-acquisition retained earnings. 4. The two companies can be viewed as a single entity because P Ltd (the parent) controls 5 Ltd, its subsidiary. Together the companies form a group. Nubction 2. nranara CIC \& CRC Question 4 The income statement and balance sheet for the year 200 for Andress Ltd and Bacall Ltd are given below Income statements for the year ended 31 December 20XO Balance sheets as at 31 December 200 Question 5 The following are the summarised balance sheets of a group of companies as at 31 December 201 \begin{tabular}{|l|r|r|r|} \hline Capital and reserves & & & \\ \hline Called up share capital & 50,000 & 20,000 & 10,000 \\ \hline Retained earnings & 100,000 & 40,000 & 15,000 \\ \hline Equity & 150,000 & 60,000 & 25,000 \\ \hline Liabilities & 30,000 & 20,000 & 10,000 \\ \hline Total Equity \& Liabilities & 180,000 & 80,000 & 35,000 \\ \hline \hline \end{tabular} At that time the net assets of S Ltd were as follows: The consolidated balance sheets of P Ltd as at 31 December were as follows: The consolidated income statement for the year ended 31 December 2019 was as follows: The statement of changes in equity for the year ended 31 December 2019 (extract) was as follows: You are also given the following information: 1. All other subsidiaries are wholly owned. 2. Depreciation charged to the consolidated income statement amounted to CU210,000 3. There were no disposals of property, plant and equipment during the year Prepare a consolidated cash flow statement for P Ltd for the year ended 31 December 2019 under the indirect method in accordance with BAS 7 Cash Flow Statements Question 7: Disposal please find the consolidated balance sheet of Othello group as on 30 June 208 and the consolidated income statement for the year ending on that date: (a) Show how the disposal will be reflected in the cash flow statement (b) Calculate additions to property, plant and equipment as they will be reflected in the cash flow statement. (c) Calculate dividends paid to the minority interest. (d) Prepare the note to the cash flow statement required for the disposal of the subsidiary. (e) Prepare the reconciliation of profit before tax to cash generated from operations Question 1: Worked example: Buying a company Draft balance sheets of P Ltd and S Ltd at 31 December 201 are as follows: - You are required to: (a) Prepare the balance sheets as at 31 December 201 and 202 for P Ltd, 5 Ltd and the P Ltd group, reflecting the above information. (b) Prepare the income statements for the year ended 31 December 202 for P Ltd, 5 Ltd and the P Ltd group, reflecting the above information. P Ltd then buys all the shares of S Ltd an 31 December 201 for CU4,000 in cash. In 20X2 P Ltd itself made sales of CU6,000 with costs of CU4,500. S Ltd continued to trade and made sales of CU3,000 with costs of CU1,000. There are no other changes to net assets in 202. i.e. surplus cash POINTS TO BE NOTED: 1 The investment in the shares of SLtd in P Ltd's books has been replaced by the underlying net assets of SLtd. The net assets of S Ltd at the date of acquisition (represented by its share capital and reserves at that date) are cancelled out against the investment in P Ltd's books. 2 As the net assets of 5 Ltd increase post-acquisition (an increase attributable to P Ltd's control of SLtd) this increase has been reflected in net assets and retained earnings. 3 The profits of SLtd are combined with those of P Ltd in the consolidated accounts from the date of acquisition, as post-acquisition profits of the subsidiary are earned under the parent's control. This is also reflected in the consolidated balance sheet, where group retained earnings include S Ltd's post-acquisition retained earnings. 4. The two companies can be viewed as a single entity because P Ltd (the parent) controls 5 Ltd, its subsidiary. Together the companies form a group. Nubction 2. nranara CIC \& CRC Question 4 The income statement and balance sheet for the year 200 for Andress Ltd and Bacall Ltd are given below Income statements for the year ended 31 December 20XO Balance sheets as at 31 December 200 Question 5 The following are the summarised balance sheets of a group of companies as at 31 December 201 \begin{tabular}{|l|r|r|r|} \hline Capital and reserves & & & \\ \hline Called up share capital & 50,000 & 20,000 & 10,000 \\ \hline Retained earnings & 100,000 & 40,000 & 15,000 \\ \hline Equity & 150,000 & 60,000 & 25,000 \\ \hline Liabilities & 30,000 & 20,000 & 10,000 \\ \hline Total Equity \& Liabilities & 180,000 & 80,000 & 35,000 \\ \hline \hline \end{tabular} At that time the net assets of S Ltd were as follows: The consolidated balance sheets of P Ltd as at 31 December were as follows: The consolidated income statement for the year ended 31 December 2019 was as follows: The statement of changes in equity for the year ended 31 December 2019 (extract) was as follows: You are also given the following information: 1. All other subsidiaries are wholly owned. 2. Depreciation charged to the consolidated income statement amounted to CU210,000 3. There were no disposals of property, plant and equipment during the year Prepare a consolidated cash flow statement for P Ltd for the year ended 31 December 2019 under the indirect method in accordance with BAS 7 Cash Flow Statements Question 7: Disposal please find the consolidated balance sheet of Othello group as on 30 June 208 and the consolidated income statement for the year ending on that date: (a) Show how the disposal will be reflected in the cash flow statement (b) Calculate additions to property, plant and equipment as they will be reflected in the cash flow statement. (c) Calculate dividends paid to the minority interest. (d) Prepare the note to the cash flow statement required for the disposal of the subsidiary. (e) Prepare the reconciliation of profit before tax to cash generated from operations