The following are the summarized statements of financial position of Elorm Ltd, Mawufemor

Ltd and Yayra Ltd as at 31st December 2018.

Additional information

a)Mawufemor Ltd acquired 75% of the equity shares of Yayra Ltd on 31st December 2012 when the balance on the retained earnings of Yayra stood at GH22 million.

b)Elorm Ltd acquired 80% of the ordinary shares of Mawufemor on 31st December 2013 when the retained earnings of Mawufemor Ltd were GH10 million and further acquired 10% of the ordinary shares of Yayra Ltd. The balance on the retained earnings of Yayra on that date was GH30 million.

c)The following intra-group balances were outstanding as at 31st December 2018 as a results of intra-group trading:

Elorm Ltd was owed GH8 million by Mawufemor Ltd

Mawufemor Ltd owed Yayra Ltd GH4 million

Yayra Ltd was owed GH2million by Elorm Ltd

d)Mawufemor Ltd supplies Elorm with a semi-process inputs regularly. Mawufemor also supplies Yayra Ltd with raw materials. Both supplies are made on a mark-up of 25% and at the end of the year, GH30 million remained in Elorm Ltd.s inventory from the GH52.5 million worth of sales during the year and GH10 million remained in Yayra Ltd.s inventory from GH17.5 million worth of sales during the year.

e)There has been no payment of dividends by either Mawufemor or Yayra since they became subsidiaries.

f)The dividend payables have not yet been recorded in the books of the shareholding companies as dividends receivable.

g)It is the policy of the group to measure NCI as a proportionate share of the net assets of the subsidiary.

Required

Prepare the consolidated statement of financial position for the Elorm Ltd group as at 31st December 2018.

Question 2

Edem Ltd, the holding company of a large group, had bought 90% of the issued capital of Alavanyo Ltd several years ago at a cost of GH530,000 when the net assets of Alavanyo amounted to GH480,000. Both companies prepare accounts to 31st December each year.

On 1st July 2018, Edem Ltd. Sold 50% of its shareholding in Alavanyo Ltd for GH540,000. At this date the carrying value of the net assets of Alavanyo was GH800,000 and no goodwill is attributed to non-controlling interests. Goodwill arising on the acquisition has suffered an impairment of 60% of its original value.

The fair value of the remaining investment in Alavanyo is estimated at GH500,000.

Required

a) Explain and illustrate how the disposal should be accounted for by Edem Ltd.