SELF ASSESSMENT TEST 1 1 IFRS 10 Consolidated financial statements provides a definition of control and identifies three separate elements of control. Which one of the following is not one of these elements of control? A Power over the investee B The power to participate in the financial and operating policies of the investee C Exposure to, or rights to, variable returns from its involvement with the investee D The ability to use its power over the investee to affect the amount of the investor's returns

2 Peter Plc owns 100% of the share capital of the following companies. The directors are unsure of whether the investments should be consolidated. In which of the following circumstances would the investment NOT be consolidated? A Peter Plc has decided to sell its investment in Alpha as it is loss-making; the directors believe its exclusion from consolidation would assist users in predicting the group's future profits B Beta is a bank and its activity is so different from the engineering activities of the rest of the group that it would be meaningless to consolidate it C Delta is located in a country where local accounting standards are compulsory and these are not compatible with IFRS used by the rest of the group D Gamma is located in a country where a military coup has taken place and Peter Plc has lost control of the investment for the foreseeable future

3 Cloud obtained a 60% holding in the 100,000 GHS1 shares of Mist on 1 January 2018, when the retained earnings of Mist were GHS850,000. Consideration comprised GHS250,000 cash, GHS400,000 payable on 1 January 2019 and one share in Cloud for each two shares acquired. Cloud has a cost of capital of 8% and the market value of its shares on 1 January 2018 was GHS2.30. Cloud measures non-controlling interest at fair value. The fair value of the non-controlling interest at 1 January 2018 was estimated to be GHS400,000. 92 What was the goodwill arising on acquisition? GHS139,370 GHS169,000 GHS119,370 GHS130,370 (2 )

4 On 1 August 2017 Patronic purchased 18 million of the 24 million GHS1 equity shares of Sardonic. The acquisition was through a share exchange of two shares in Patronic for every three shares in Sardonic. The market price of a share in Patronic at 1 August 2017 was GHS5.75. Patronic will also pay in cash on 31 July 2019 (two years after acquisition) GHS2.42 per acquired share of Sardonic. Patronic's cost of capital is 10% per annum. What is the amount of the consideration attributable to Patronic for the acquisition of Sardonic?

5 On 1 April 20X0 Picant acquired 75% of Sander's equity shares by means of a share exchange and an additional amount payable on 1 April 20X1 that was contingent upon the post-acquisition performance of Sander. At the date of acquisition Picant assessed the fair value of this contingent consideration at GHS4.2 million but by 31 March 20X1 it was clear that the amount to be paid would be only GHS2.7 million. How should Picant account for this GHS1.5 million adjustment in its financial statements as at 31 March 20X1? A Debit current liabilities/Credit goodwill B Debit retained earnings/Credit current liabilities C Debit goodwill/Credit current liabilities D Debit current liabilities/Credit retained earnings

6 Crash acquired 70% of Bang's 100,000 GHS1 ordinary shares for GHS800,000 when the retained earnings of Bang were GHS570,000 and the balance in its revaluation surplus was GHS150,000. Bang also has an internally developed customer list which has been independently valued at GHS90,000. The non-controlling interest in Bang was judged to have a fair value of GHS220,000 at the date of acquisition. What was the goodwill arising on acquisition? E GHS200,000 F GHS163,000 G GHS226,000 H GHS110,000 GHS105 million GHS139.5 million GHS108.2 million GHS103.8 million (2 mar)k s

7 Phantom acquired 70% of the GHS100,000 equity share capital of Ghost, its only subsidiary, for GHS200,000 on 1 January 20X9 when the retained earnings of Ghost were GHS156,000. At 31 December 20X9 retained earnings are as follows. GHS Phantom 275,000 Ghost 177,000 Phantom considers that goodwill on acquisition is impaired by 50%. Non-controlling interest is measured at fair value, estimated at GHS82,800. What are group retained earnings at 31 December 20X9? I GHS276,300 J GHS289,700 K GHS280,320 L GHS269,200

8 An entity has bought a 25% share in another entity with a view to selling that investment within six months. The investment has been classified as held for sale in accordance with IFRS 5. How should the investment be treated in the final year accounts? (a) It should be equity accounted. (b) The assets and liabilities should be presented separately from other assets in the balance sheet under IFRS 5. (c) The investment should be dealt with under IAS 39. (d) Purchase accounting should be used for this investment.

9. How is goodwill arising on the acquisition of a subsidiary dealt with in the financial statements? (a) It is recognised as an asset and subsequently amortized. (b) It is recognised as an asset and subsequently impairment tested . (c) It is written off against profit or loss. (d) Goodwill is not recognized separately within the carrying amount of the investment.

10 Augustine Plcacquired 160,000 ordinary shares in Veronica Plcon 1 April 2015 at a cost of GH154,000. Veronica Ltds retained earnings at that date were GH100,000 and its issued ordinary share capital was GHS200,000 [consisting of 200,000 ordinary shares issued at GHS1 per share]. Non-controlling interest [NCI] is measured at proportionate share of the net assets of subsidiary. What is the amount of the gain on a bargain purchase arising on the acquisition? A GH70,000 B GH86,000 C GH126,000 D GH146,000

11 Serwaa Plchas two subsidiaries, Mary Plcand Wadie Ltd. It purchased 10,000 shares in Mary Plcon 1 January 2015 for GH105,000 when the retained earnings of Mary Plcstood at GH63,000. It purchased 15,000 shares in Wadie Plcfor GH90,000 on 31 December 2015 when the retained earnings of Wadie Plcstood at GH48,000. The issued share capitals of the two subsidiaries are as follows: Mary Plc [15,000 ordinary shares] GH45,000 Wadie Plc [20,000 ordinary shares] GH60,000 By the end of 2015 goodwill impairment losses totaled GH12,000. What is the carrying amount of goodwill in the consolidated statement of financial position at 31 December 2015? A GH32,000 B GH30,000 C GH44,000 D GH12,000

12 Emma Plcacquired 60% of the share capital of Paulina Plcon 31 March 2015. The share capital and retained earnings of Paulina Plcas on 31 December 2015 were as follows: GH Ordinary [issued at GHS1 per share] 400,000 Retained earnings at 1 January 2015 120,000 Net profit for 2015 60,000 580,000 The profits of Paulina Plchave accrued evenly throughout 2015. The gain on a bargain purchase arising was GH3,000. What is the cost of the investment in Paulina Plcin the separate statement of financial position of Emma Plcas on 31 December 2015? A GH318,000 B GH324,000 C GH336,000 D GH342,000

13 Great Plchas owned 100% of the issued share capital of Small Plcfor many years. Great Plcsells goods to Small Plcat cost plus 20%. The following information is available for the year. Revenue

GH Great Ltd 460,000 Small Ltd 120,000 During the year Great Plcsold goods to Small Plcfor GH60,000, of which GH18,000 were still held in inventory by Small Plcat the year end. At what amount should total revenue appear in the consolidated income statement? A GH520,000 B GH530,000 C GH535,000 D GH562,000

14 Sunyani Plcis the sole subsidiary of Kumasi Ltd. The cost of sales figures for 2015 for Kumasi Plcand Sunyani Plcwere GH11 million and GH10 million respectively. During 2015 Kumasi Plcsold goods which had cost GH2 million to Sunyani Plcfor GH3 million. Sunyani Plchas not yet sold any of these goods. What is the consolidated cost of sales figure for 2015? A GH16 million B GH18 million C GH19 million D GH20 million Using the following information answer questions 15 and 16 Patience Plchas a wholly owned subsidiary, Abotare Ltd. During 2015 Abotare Plcsold goods to Patience Plcfor GH40,000 which was cost plus 25%. At 31 December 2015 GH20,000 of these goods remained unsold.

15 In the consolidated income statement for the year ended 31 December 2015 the revenue will be reduced by A GH20,000 B GH30,000 C GH32,000 D GH40,000

16 In the consolidated income statement for the year ended 31 December 2015 the profit will be reduced by A GH4,000 B GH6,000 C GH8,000 D GH10,000

Using the following trading accounts and related note answer questions 17 and 18 For the year ended 30 April 2015 Happy Plcand its 90% subsidiary Sorry Plchad the following trading accounts. Happy Ltd Sorry Ltd GH GH Revenue 100,000 46,000 Cost of sales (70,000) (34,500) Gross profit 30,000 11,500 Notes (1) In each company all sales were made at the same percentage mark-up. (2) Goods purchased by Sorry Plcat a cost of GH9,000 were sold to Happy Ltd. This transaction is reflected in the above trading accounts. Happy Plchad sold two-thirds of these purchases at the year end. (3) There had been no trading between Sorry Plcand Happy Plcin previous years.

17 The consolidated revenue for the year was A GH146,000 B GH143,000 C GH137,000 D GH134,000

18 The consolidated gross profit for the year was A GH40,500 B GH40,350 C GH39,450 D GH38,50

19 Father Plcin 2015 invoiced GH120,000 of goods to its 75% subsidiary, Stella Ltd, at cost plus 30%. Stella Plchad 25% of these in inventory at the year end. At the start of the year Stella Plchad GH15,000 worth of inventory invoiced from Father Plcon the same pricing basis, all of which was sold in 2015. The consolidated adjustment to group gross profit in respect of inventory is debit. A GH3,461 B GH4,500 C GH6,923 D GH9,000