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Week 9 live online question Parma, a public listed company acquired 16 million ordinary shares in Sharma on 1 1 July 2019. The purchase consideration

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Week 9 live online question Parma, a public listed company acquired 16 million ordinary shares in Sharma on 1 1 July 2019. The purchase consideration is made up as follows: An immediate cash payment of 4 million. A share exchange of two shares in Pamma for every five shares in Shama. Parma has only recorded the cash payment. The value of each share in Parma and Sharma at the date of acquisition was 5 and 2.60 respectively. The summarised draft statements of the financial position and income statements of the two companies at 31 December 2019 are shown below: Statements of Financial Position as at 31 December 2019 Parma Sharma 000 000 000 000 Non-current assets Property, plant and equipment 25,000 27,000 Investments 4.000 nil Current assets Inventory 15,000 9,000 Trade receivables 10,000 10,000 Bank 14.000 13.000 39.000 32.000 Total assets 68,000 59,000 Equity and liabilities Equity Equity shares of 50 pence each 30,000 10,000 Retained earnings 21.000 13,000 51,000 23,000 Current liabilities 17.000 36.000 Total equity and liabilities 68.000 59.000 Statement of profit or loss for the year ended 31 December 2019 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit before tax Income tax expense Profit for the year Parma 000 143,000 (81.000 62,000 (5,000) (30.000 27,000 (11.200 15,800 Sharma 000 80,000 (46.000 34,000 (1,500) (16.500) 16.000 (8.000) 8.000 The following information is relevant: (0) At the date of acquisition the fair value of Sharma's property, plant and equipment were equal to their carrying value with the exception of an item of plant, which had a fair value of 4 million in excess of its carrying value. The plant had a remaining useful life of 5 years at this date. (ii) Pama sold goods to Sharma for 15 million in the post-acquisition period. On 3 January 2020 Sharma received goods at an original cost to Parma of 800,000 and an invoice price of 1 million. Sharma has not yet recorded the receipt of these goods Goodwill is reviewed for impairment annually. At 31 December 2019 there had been an impairment loss of 2.5 million in the value of goodwill since acquisition. (iv) Assume all profits accrue evenly over the year. (v) It is group policy to value the non-controlling interest at acquisition at full (or fair) value. Required Prepare the consolidated statement of financial position and consolidated statement of profit or loss for Parma as at 31 December 2019. Week 9 live online question Parma, a public listed company acquired 16 million ordinary shares in Sharma on 1 1 July 2019. The purchase consideration is made up as follows: An immediate cash payment of 4 million. A share exchange of two shares in Pamma for every five shares in Shama. Parma has only recorded the cash payment. The value of each share in Parma and Sharma at the date of acquisition was 5 and 2.60 respectively. The summarised draft statements of the financial position and income statements of the two companies at 31 December 2019 are shown below: Statements of Financial Position as at 31 December 2019 Parma Sharma 000 000 000 000 Non-current assets Property, plant and equipment 25,000 27,000 Investments 4.000 nil Current assets Inventory 15,000 9,000 Trade receivables 10,000 10,000 Bank 14.000 13.000 39.000 32.000 Total assets 68,000 59,000 Equity and liabilities Equity Equity shares of 50 pence each 30,000 10,000 Retained earnings 21.000 13,000 51,000 23,000 Current liabilities 17.000 36.000 Total equity and liabilities 68.000 59.000 Statement of profit or loss for the year ended 31 December 2019 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit before tax Income tax expense Profit for the year Parma 000 143,000 (81.000 62,000 (5,000) (30.000 27,000 (11.200 15,800 Sharma 000 80,000 (46.000 34,000 (1,500) (16.500) 16.000 (8.000) 8.000 The following information is relevant: (0) At the date of acquisition the fair value of Sharma's property, plant and equipment were equal to their carrying value with the exception of an item of plant, which had a fair value of 4 million in excess of its carrying value. The plant had a remaining useful life of 5 years at this date. (ii) Pama sold goods to Sharma for 15 million in the post-acquisition period. On 3 January 2020 Sharma received goods at an original cost to Parma of 800,000 and an invoice price of 1 million. Sharma has not yet recorded the receipt of these goods Goodwill is reviewed for impairment annually. At 31 December 2019 there had been an impairment loss of 2.5 million in the value of goodwill since acquisition. (iv) Assume all profits accrue evenly over the year. (v) It is group policy to value the non-controlling interest at acquisition at full (or fair) value. Required Prepare the consolidated statement of financial position and consolidated statement of profit or loss for Parma as at 31 December 2019

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