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Revision 6

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Duyên Phạm
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Revision 6

Consolidate

Uploaded by

Duyên Phạm
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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REVISION 6

Before 2020 P Company had acquired 10% of the shares of S Company for $900,000. These
investments were classified as a financial asset on the balance sheet of P Company according to
IFRS 9. On 31 December 2022 these were reported at a fair value of $1,100,000 on the balance
sheet.
On 1 January 2023 P Company acquired the remaining 90 % of the equity capital of S
Company at a cost of $5,000,000. At acquisition date all identifiable assets and liabilities of S
Company were at fair value, and the total equity of S Company consisted of:
Share capital (1,000,000 shares) $ 3,200,000
Retained earnings $ 2,000,000
Total $ 5,200,000
All identifiable assets and liabilities of S Company were recorded at amount equal to fair value
except as follows:

Carrying amount Fair value

Inventory $600,000 $700,000

Plant (at cost of $3,000,000) 1,900,000 2,100,000


The plant is expected to have a further useful life of five years. All the inventory on hand at 1
January 2023 was sold by 31 December 2023
The income tax rate is 30%
Required
a. Prepare acquisition analysis and determine goodwill. (10 marks)
b. Prepare consolidation worksheet entries as of 1 January 2023. (5 marks)
c. Prepare consolidation worksheet entries as of 31 December 2024. (5 marks)
d. IFRS 3 (paragraph 19) prescribes two methods to measure non-controlling interest (NCI).
What are these methods and explain the impact of these methods on the determination of
goodwill on consolidation. (5 marks)
ASSUMED NO TAX EFFECTS IN CONSOLIDATED FINANCIAL STATEMENTS
1/1/2023
Dr. Inventory 100,000
Dr. Plant 200,000
Cr. Fair value Adjustment 300,000
The plant is expected to have a further useful life of five years.
All the inventory on hand at 1 January 2023 was sold by 31 December 2023
Dr. Share Capital: 3,200,000
Dr. RE: 2,000,000
Dr. Fair value Adjustment: 300,000
Dr. Goodwill: 600,000
Cr. Investment in S. Company: 1100, 000 + 5,000,000 = 6,100,000

During year 2023 (no entry but we must understand what happened)
Depreciation plant:
Dr. DPRN expense 200,000/5 = 40,000
Cr. Acc. DPRN 40,000

Dr. Cost of goods sold 100,000


Cr. Inventory 100,000

31/12/2023
Prepare Consolidated SOFP
Make some adjustment to Consolidated SOFP at 1 Jan. 2023
1,
Decrease RE: 140,000
Decrease Plant: 40, 000
Decrease Inventory: 100,000
2, Next year 31/12/2024 Prepare Consolidated SOFP
Make adjustment after add up items from Financial statements of S Com. & P Com.
A, Increase Plant: 200,000
Increase Equity (Fair Value Adjustment): 200,000
B, Increase Inventory: 100,000
Increase Equity (Fair Value Adjustment): 100,000
C,
Dr. Share Capital: 3,200,000
Dr. RE: 2,000,000 (initial RE)
Dr. Equity (Fair value Adjustment): 300,000
Dr. Goodwill: 600,000
Cr. Investment in S. Company: 1100, 000 + 5,000,000 = 6,100,000
D,
Decrease RE: 140,000
Decrease Plant: 40, 000
Decrease Inventory: 100,000

31/12/2024: Copy => paste entries SIMILAR TO 2023 (except D)


D,
Decrease RE: 80,000
Decrease Plant: 80, 000

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