Statements of financial position

Black White Grey

Assets

Property, plant and equipment 350,000 180,000 100,000

Investments 260,000

Inventory 44,000 28000 12,000

Equity and liabilities

Equity capital (1 shares) 240,000 100,000 75,000

Share premium 110,000 60,000 10,000

Retained earnings 400,000 110,000 35,000

On 1^st May 2021, Black purchased 75,000 shares in White. White had retained earnings of 50,000 as at 1^st January 2021. At the date of acquisition, the fair value of property, plant and equipment of White was 30,000 above its carrying value. The fair value of non-controlling interest is based on the share price of White in the market at the date of acquisition. On 1^st May 2021, the market price per share of Black and White was 3 and 2.5 respectively. Property, plant and equipment of White had a remaining estimated useful life of five years at the acquisition date. At year-end, it was determined that goodwill in White was impaired by 5,000.

On 1^st January 2021, Black purchased 15,000 equity shares in Grey for 40,000. At that date, Grey had retained earnings of 10,000. On 31^st December 2021, there was an evidence that investment in Grey has been impaired by 2,000. Black has no other investments beyond its investment in White and Grey.

Just after acquisition of White, White sold goods to Black for 20,000 at a mark-up of 25%. At year-end, Black had only sold 80% of these goods. On the other hand, Black sold goods to Grey during the year for 12,000 at a profit margin of 25%. Grey had 50% of these goods remaining in stores at year-end.

Required

Calculate the following amounts that should appear in the Black consolidated statement of financial position as at 31^st December 2021:

1. Goodwill

2. Consolidated inventory

3. Consolidated property, plant and equipment

4. Investment in associate

5. Consolidated retained earnings

6. Non-controlling interest

Question 2: Group cash flow statement

Below is an extract from the consolidated financial statements of the Rose Group for the year ended 31^st December 2021:

Consolidated statements of financial position

2021 2020

$000 $000

Non-current assets:

Property, plant and equipment 2,000 1,200

Investment in associate 670 600

Current assets:

Inventories 300 200

Trade receivables 240 170

Cash and cash equivalents 140 100

Equity and liabilities

Share capital ($1 shares) 1,500 1,300

Share premium 300 140

Non-controlling interest 125 155

Non-current liabilities:

Loans, 5% due in 2030 360 400

Current liabilities:

Trade payables 480 600

Tax payable 330 260

Interest payable 155 140

Consolidated statement of profit or loss and other comprehensive income for the year ended 31^st December 2021:

$000

Revenue 1,400

Operating expenses (1,050)

Profit from operations 350

Gain on disposal of subsidiary 80

Loss on disposal of plant (20)

Finance cost (30)

Share of profit of associate 100

Profit before tax 480

Tax (100)

Profit for the period 380

Attributable to:

Parent 257

Non-controlling interest 123

The following information is available at year-end:

1. Depreciation of $150,000 was included in operating expenses during the year. Plant with a carrying amount of $335,000 was sold for $315,000.

2. During the year, Rose acquired 80% of the equity share capital of Daisy paying cash consideration of $1.150 million. The fair value of Daisy's net assets at acquisition was made up as follows:

$000

Property, plant and equipment 680

Inventories 75

Trade receivables 120

Cash and cash equivalents 150

Trade payables (180)

Tax payable (60)

785

Required:

1. Prepare the cash flow from operating activities section of the group cash flow statement for the year ended 31^st December 2021.

2. Calculate the following amount that should appear in the investing section of the group cash flow statement for the year ended 31^st December 2021 and specify whether the item is an inflow or outflow:

1. Investment in property, plant and equipment

2. Cash paid to acquire subsidiary

3. Dividends received from associate

3. Prepare an extract from the financing section of the group cash flow statement for the year ended 31^st December 2021.

Question 3: translation of foreign subsidiary

The following are extracts from draft financial statements relate to Atlas, a public limited company, and Pyramids, its foreign subsidiary:

Extracts from draft statements of financial position as at 31 December 2020

Atlas Pyramids

QAR m LE m

Assets

Non-current assets

Property 325 280

Investment in Pyramids 50

Machinery 200 120

Total non-current assets 575 400

Equity

Equity shares (QAR1 & LE1) 80 200

Retained earnings 230 280

Total equity 310 480

Atlas owns 70% of the equity shares of Pyramids, a company located in Egypt, which has presented its financial statements in Egyptian Pounds (LE). The shares in Pyramids were acquired on 1 August 2020.

At the date of acquisition, retained earnings of Pyramids were LE 160 million. On this date, non-depreciable land was carried in the financial statements of Pyramids at LE 30 million but it had a fair value of LE 40 million.

The non-controlling interest at acquisition is to be calculated at fair value by reference to the quoted share price of Pyramids. At the acquisition date, the quoted share price was LE 3 per share.

An impairment review of goodwill was undertaken as at 31 December 2020. The goodwill of Pyramids is to be impaired by 20%. Pyramids has not issued any equity shares since acquisition.

The following exchange rates have been provided:

LE to 1 QAR

1 August 2020 4.6

1 November 2020 4.8

31 December 2020 5

Average for the year to 31 December 2020 4.7

Required:

1. Calculate, with supporting explanations, the value of goodwill arising on the

acquisition of Pyramids that should be reported in the consolidated statement

of financial position as at 31 December 2020.

2. Calculate the balance on the group translation reserve as at 31 December 2020.

3. Calculate the amount of consolidated retained earnings that should be reported in the consolidated statement of financial position as at 31 December 2020

4. Calculate the amount of non-controlling interest that should be reported in the consolidated statement of financial position as at 31 December 2020.

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