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ACW366 - Tutorial Exercises 3 PDF

This document contains 4 questions regarding consolidated financial statements. Question 1 asks for the amount of retained earnings to be included in the consolidated statement of financial position of Black plc after acquiring Red plc. Question 2 asks for the amount of current assets less current liabilities in the consolidated statement of Milton plc and its subsidiary Keynes Ltd, taking into account intra-group balances. Question 3 asks for the total carrying amount of current liabilities in the consolidated statement of Laker Ltd and its 80% owned subsidiary Hammond Ltd, again considering intra-group balances. Question 4 asks for the amount to be shown as trade receivables in the consolidated statement of Austen plc, which owns 100

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261 views

ACW366 - Tutorial Exercises 3 PDF

This document contains 4 questions regarding consolidated financial statements. Question 1 asks for the amount of retained earnings to be included in the consolidated statement of financial position of Black plc after acquiring Red plc. Question 2 asks for the amount of current assets less current liabilities in the consolidated statement of Milton plc and its subsidiary Keynes Ltd, taking into account intra-group balances. Question 3 asks for the total carrying amount of current liabilities in the consolidated statement of Laker Ltd and its 80% owned subsidiary Hammond Ltd, again considering intra-group balances. Question 4 asks for the amount to be shown as trade receivables in the consolidated statement of Austen plc, which owns 100

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Tutorial Exercise 3

Answer the following questions.

1 Black plc
The summarised statements of financial position of Black plc and Red plc at 31 December 20X6 were
as follows.

Black plc Red plc


£ £
Total assets 60,000,000 29,000,000

Share capital 20,000,000 10,000,000


Retained earnings 24,000,000 4,000,000
Equity 44,000,000 14,000,000
Current liabilities 16,000,000 15,000,000
Total equity and liabilities 60,000,000 29,000,000

On 1 January 20X7 Black plc bought all the share capital of Red plc for £17,000,000 in cash. The
carrying amounts of Red plc’s assets are considered to be fair values.
Requirement
What will be the amount of retained earnings to be included in the consolidated statement of
financial position as at 1 January 20X7?

2 Milton plc
Milton plc owns all the share capital of Keynes Ltd. The following information is extracted from the
individual company statements of financial position as on 31 December 20X1.

Milton plc Keynes Ltd


£ £
Current assets 500,000 200,000
Current liabilities 220,000 90,000

Included in Milton plc’s purchase ledger is a balance in respect of Keynes Ltd of £20,000. The
balance on Milton plc’s account in the sales ledger of Keynes Ltd is £22,000. The difference between
those figures is accounted for by cash in transit.
Requirement
If there are no other intra-group balances, what is the amount of current assets less current liabilities
in the consolidated statement of financial position of Milton plc and its subsidiary?

3 Laker Ltd
Laker Ltd owns 80% of the ordinary shares of Hammond Ltd. The following amounts have been
extracted from their draft financial statements at 31 December 20X0.

ICAEW 2021 11: Consolidated statement of financial position 535


Laker Ltd Hammond Ltd
£ £
Current liabilities
Trade payables 5,200 7,100
Amount owed to subsidiary 500 –
Income tax 100 150
Amounts owed to trade investments 150 200
Other payables 50 70
6,000 7,520

Hammond Ltd shows an amount receivable from Laker Ltd of £620 and the difference is due to cash
in transit.
Requirement
What is the total carrying amount of current liabilities in the consolidated statement of financial
position of Laker Ltd?

4 Austen plc
Austen plc has owned 100% of Kipling Ltd and 60% of Dickens Ltd for many years. At 31 December
20X5 the trade receivables and trade payables shown in the individual company statements of
financial position were as follows.

Austen plc Kipling Ltd Dickens Ltd


£ £ £
Trade receivables 50,000 30,000 40,000
Trade payables 30,000 15,000 20,000

Trade payables are


made up as follows:

Amounts owing to
Austen – – –
Kipling 2,000 – 4,000
Dickens 3,000 – –
Other suppliers 25,000 15,000 16,000
30,000 15,000 20,000

The intra-group accounts agreed after taking into account the following.
(1) An invoice for £3,000 posted by Kipling Ltd on 31 December 20X5 was not received by Austen
plc until 2 January 20X6.
(2) A cheque for £2,000 posted by Austen plc on 30 December 20X5 was not received by Dickens
Ltd until 4 January 20X6.
Requirement
What amount should be shown as trade receivables in the consolidated statement of financial
position of Austen plc?

536 Financial Accounting and Reporting − IFRS ICAEW 2021

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