TEST 3-CSFP

1. Kampala (K) bought 80% of the equity share capital of Mbarara two years ago on 1 January 20X9 when the retained earnings of Mbarara stood at $52,000. Given below are the statements of financial position as at 31 December 20X9:

	Kampala	Mbarara
	$000	$000
Non-Current Assets
PP&E	550	120
Investments	516
	1,066	120
CA
Inventory	250	100
Receivables	300	90
Bank	190	50
	740	240
Total Assets	1,806	360
Equity
Share Capital $ 1	650	90
RE	560	150
	1,210	240
NCL	396	70
CL	200	50
	596	120
Total Equity & Liabilities	1,806	360

Additional information

1. Kampala paid $300,000 in cash for the investment in Mbarara and issued three shares for any four shares received from Mbarara. The market price of Kampalas shares at the time of acquisition was $1.50 per share. In addition, Kampala promised to pay $ 150,000 in 3 years time. Mbarara has only recorded cash in its books. Cost of capital is 10%
2. Mbarara transferred goods to Kampala at a mark-up of 25%. These goods had cost Mbarara $40,000. At the year-end, of these goods were still in the inventory.
3. At the reporting date, Kampala recorded a payable to Mbarara of $30,000. This did not agree to the corresponding amount in Mbararas financial statements of $ 50,000. The difference was a cash in transit.
4. The Kampala group uses the fair value method to value the NCI. The fair value of the NCI at the time of acquisition was $32,000
5. Goodwill has been impaired by 145,000
6. Included in the property plant & Equipment of Mbarara is land at a carrying value of $45,000. However, at the time of acquisition, this had a fair value of $65,000. Equipment had a fair value of 45,000 above its carrying value and had a remaining life of 3years at the time of acquisition