QUESTION 3 (36 MARKS) The following are the balance sheets of Ukraine Limited, Poland Limited and Russia Limited, as at the 31 December 2019. The three companies are major players in the automotive industry. Max Limited acquired 75% of the shares in Poland Limited on January 1 2017 when the reserve balances were as follows: General reserves: $24,000 and retained earnings $60 000. The acquisition of Poland Limited consisted of a deferred cash payment of $300,000 and a share exchange of 2 shares in Ukraine Limited for every 5 shares acquired in Poland Limited. The market price for a Ukraine Limited share at that date was $4.50. The transaction has not been recorded on the books. On 1 July 2019 Ukraine Limited acquired 30,000 shares in Russia Limited for cash at a price of $2.70 per share. For the year ended 31 December 2019 Russia Limited reported a profit of $64,000 (assume profit accrued evenly during the year). This transaction was recorded on the books. Russia Ltd 170,000 64.000 70,000 6.000 120,000 30,000 Balance Sheet as at 31 December 2019 Ukraine Ltd Poland Ltd $ $ $ $ Non-Current Assets Land 1,200,000 300,000 Equipment 660, 000 100,000 Less Depreciation 24.000 636, 000 10.000 90.000 Motor Vehicles 250,000 200 000 Less Depreciation 50.000 200,000 40 000 160 000 2,036 000 550 000 Investments Russia Ltd 81,000 Current Assets Inventory 145,000 25,000 Accounts receivable 120,000 40,000 Prepayments 12, 000 7,000 Bank & cash 90,000 448,000 40,000 112 000 2,484,000 662 000 90,000 324,000 45,000 8,000 2,000 13,000 68.000 392,000 EQUITY & LIABILITES $1 Ordinary shares 900,000 200.000 100,000 Reserves General reserves Retained earnings 170,000 120,000 30,000 24, 000 34,000 36,000 976, 000 362, 000 200,000 Non-Current Liabilities 4% Debentures Current Liabilities Trade Payables Taxation 145,000 173.000 8,000 38.000 15,000 7,000 318,000 2,484.000 46, 000 662.000 22.000 392,000 QUESTION 3 .....Continued ADDITIONAL INFORMATION: 1. At the date of the acquisition the directors of Ukraine Limited determined that the fair market value of land owned by Poland Ltd was $450 000, however no adjustments were made. 2. At December 31 2018. goodwill was impaired by $90,000. 3. During the year Ukraine Limited sold goods to Poland Ltd for $140 000, after charging a mark-up of 40%. At 31 December 2014 only 70% of the goods were sold. 4. During the year Poland Limited transferred a motor vehicle to Ukraine Ltd at a price of $30,000, the motor vehicle was new and cost Poland Limited $20,000. Ukraine Limited depreciated the motor vehicle at 10% of the cost to them. 5. 6. Non-Controlling Interest should be valued at $3 per share at acquisition date. The investment in Poland limited was impaired by 15% of cost price. Required: Prepare the Consolidated Balance Sheet for the Ukraine Limited Group as at 31 December 2019. (36 marks) QUESTION 3 (36 MARKS) The following are the balance sheets of Ukraine Limited, Poland Limited and Russia Limited, as at the 31 December 2019. The three companies are major players in the automotive industry. Max Limited acquired 75% of the shares in Poland Limited on January 1 2017 when the reserve balances were as follows: General reserves: $24,000 and retained earnings $60 000. The acquisition of Poland Limited consisted of a deferred cash payment of $300,000 and a share exchange of 2 shares in Ukraine Limited for every 5 shares acquired in Poland Limited. The market price for a Ukraine Limited share at that date was $4.50. The transaction has not been recorded on the books. On 1 July 2019 Ukraine Limited acquired 30,000 shares in Russia Limited for cash at a price of $2.70 per share. For the year ended 31 December 2019 Russia Limited reported a profit of $64,000 (assume profit accrued evenly during the year). This transaction was recorded on the books. Russia Ltd 170,000 64.000 70,000 6.000 120,000 30,000 Balance Sheet as at 31 December 2019 Ukraine Ltd Poland Ltd $ $ $ $ Non-Current Assets Land 1,200,000 300,000 Equipment 660, 000 100,000 Less Depreciation 24.000 636, 000 10.000 90.000 Motor Vehicles 250,000 200 000 Less Depreciation 50.000 200,000 40 000 160 000 2,036 000 550 000 Investments Russia Ltd 81,000 Current Assets Inventory 145,000 25,000 Accounts receivable 120,000 40,000 Prepayments 12, 000 7,000 Bank & cash 90,000 448,000 40,000 112 000 2,484,000 662 000 90,000 324,000 45,000 8,000 2,000 13,000 68.000 392,000 EQUITY & LIABILITES $1 Ordinary shares 900,000 200.000 100,000 Reserves General reserves Retained earnings 170,000 120,000 30,000 24, 000 34,000 36,000 976, 000 362, 000 200,000 Non-Current Liabilities 4% Debentures Current Liabilities Trade Payables Taxation 145,000 173.000 8,000 38.000 15,000 7,000 318,000 2,484.000 46, 000 662.000 22.000 392,000 QUESTION 3 .....Continued ADDITIONAL INFORMATION: 1. At the date of the acquisition the directors of Ukraine Limited determined that the fair market value of land owned by Poland Ltd was $450 000, however no adjustments were made. 2. At December 31 2018. goodwill was impaired by $90,000. 3. During the year Ukraine Limited sold goods to Poland Ltd for $140 000, after charging a mark-up of 40%. At 31 December 2014 only 70% of the goods were sold. 4. During the year Poland Limited transferred a motor vehicle to Ukraine Ltd at a price of $30,000, the motor vehicle was new and cost Poland Limited $20,000. Ukraine Limited depreciated the motor vehicle at 10% of the cost to them. 5. 6. Non-Controlling Interest should be valued at $3 per share at acquisition date. The investment in Poland limited was impaired by 15% of cost price. Required: Prepare the Consolidated Balance Sheet for the Ukraine Limited Group as at 31 December 2019. (36 marks)