Question 2 (65 marks) Extracts from the group's consolidated financial statements for the year- end are set out below. Consolidated statements of financial position as at 31 December 2020 $ 2019 $ ASSETS Non-current assets Property, plant and equipment Goodwill Investment in associate 1,500,000 100,000 300,000 1,900,000 1,100,000 120,000 400,000 1,620,000 Current assets Inventories Trade and other receivables Cash and cash equivalents 300,000 400,000 27,000 727,000 2,627,000 280,000 320,000 6,000 606,000 2,226,000 Total assets EQUITY AND LIABILITIES Equity Ordinary share capital ($1 shares) 750,000 Retained earnings 800,000 Attributable to the equity holders of Parent 1,550,000 Non-controlling interest 500,000 2,050,000 Current liabilities Trade and other payables 427,000 Income tax payable 150,000 577,000 Total equity and liabilities 2,627,000 500,000 400,000 900,000 490,000 1,390,000 658,000 178,000 836,000 2,226,000 Consolidated statement of profit or loss for the year ended 31 December 2020 (extract) Continuing operations Profit from operations Share of profits of associate Profit before tax Income tax expense Profit for the year from continuing operations Discontinued operations Loss for the year from discontinued operations 600,000 50.000 650,000 -53,625 596,375 Note 1 - 70.000 Profit for the year 526,375 Attributable to: Owners of the parent Non-controlling interest 421,100 105,275 526,375 Note 1 Loss before tax Income tax refund Loss on disposal $ -90,000 30,000 Note 2 - 10,000 -70,000 Note 2 The net assets of that disposal subsidiary at the date of disposal were: Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables 100,200 12.000 300 -80,000 32,500 Additional information: a The parent company held a lot of subsidiaries and one associate company b The net asset approach was adopted by the group to measure the non-controlling interest. c During the current year ended, the impairments of goodwill of other subsidiaries were recognized. d During the current year ended, the only disposals of property, plant and equipment made by the group were those on the disposal of that subsidiary Ltd. The group purchased property, plant and equipment for cash. $300,000 was the total group depreciation charge during the year. e During the current year, there was a bonus issue out of retained earnings. $15,000 was the bonus shares issued during the year. Apart from the bonus issue, the parent company also issued shares and received cash from shareholders. f During the current year, the parent company sold its 70% holding subsidiary for cash. The loss from discontinued operations in the consolidated statement of profit or loss related wholly to the sale of all shares in that subsidiary. For the disposal of that subsidiary, its goodwill arising on business combinations had been fully written off as at current year end. $12,750 cash was received from the disposal of that subsidiary by the group 70% of the parent held that subsidiary before it was disposed of during the year. Requirements: 1 Prepare a consolidated statement of cash flows for the year ended 31 December 2020, using the indirect method. (50 marks) 2 Prepare the journal entry regarding the business transaction for the $10,000 loss on disposal of the subsidiary. (5 marks) 3 Prepare all journal entries regarding the movement of the associate during the year. (6 marks) 4 Prepare the journal entry regarding the impairment of goodwill during the year. (4 marks) Question 2 (65 marks) Extracts from the group's consolidated financial statements for the year- end are set out below. Consolidated statements of financial position as at 31 December 2020 $ 2019 $ ASSETS Non-current assets Property, plant and equipment Goodwill Investment in associate 1,500,000 100,000 300,000 1,900,000 1,100,000 120,000 400,000 1,620,000 Current assets Inventories Trade and other receivables Cash and cash equivalents 300,000 400,000 27,000 727,000 2,627,000 280,000 320,000 6,000 606,000 2,226,000 Total assets EQUITY AND LIABILITIES Equity Ordinary share capital ($1 shares) 750,000 Retained earnings 800,000 Attributable to the equity holders of Parent 1,550,000 Non-controlling interest 500,000 2,050,000 Current liabilities Trade and other payables 427,000 Income tax payable 150,000 577,000 Total equity and liabilities 2,627,000 500,000 400,000 900,000 490,000 1,390,000 658,000 178,000 836,000 2,226,000 Consolidated statement of profit or loss for the year ended 31 December 2020 (extract) Continuing operations Profit from operations Share of profits of associate Profit before tax Income tax expense Profit for the year from continuing operations Discontinued operations Loss for the year from discontinued operations 600,000 50.000 650,000 -53,625 596,375 Note 1 - 70.000 Profit for the year 526,375 Attributable to: Owners of the parent Non-controlling interest 421,100 105,275 526,375 Note 1 Loss before tax Income tax refund Loss on disposal $ -90,000 30,000 Note 2 - 10,000 -70,000 Note 2 The net assets of that disposal subsidiary at the date of disposal were: Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables 100,200 12.000 300 -80,000 32,500 Additional information: a The parent company held a lot of subsidiaries and one associate company b The net asset approach was adopted by the group to measure the non-controlling interest. c During the current year ended, the impairments of goodwill of other subsidiaries were recognized. d During the current year ended, the only disposals of property, plant and equipment made by the group were those on the disposal of that subsidiary Ltd. The group purchased property, plant and equipment for cash. $300,000 was the total group depreciation charge during the year. e During the current year, there was a bonus issue out of retained earnings. $15,000 was the bonus shares issued during the year. Apart from the bonus issue, the parent company also issued shares and received cash from shareholders. f During the current year, the parent company sold its 70% holding subsidiary for cash. The loss from discontinued operations in the consolidated statement of profit or loss related wholly to the sale of all shares in that subsidiary. For the disposal of that subsidiary, its goodwill arising on business combinations had been fully written off as at current year end. $12,750 cash was received from the disposal of that subsidiary by the group 70% of the parent held that subsidiary before it was disposed of during the year. Requirements: 1 Prepare a consolidated statement of cash flows for the year ended 31 December 2020, using the indirect method. (50 marks) 2 Prepare the journal entry regarding the business transaction for the $10,000 loss on disposal of the subsidiary. (5 marks) 3 Prepare all journal entries regarding the movement of the associate during the year. (6 marks) 4 Prepare the journal entry regarding the impairment of goodwill during the year. (4 marks)