This week, you will review financial statements of various parent organizations and the subsidiaries that they acquired. You will be asked to develop consolidated financial statements for the groups under different scenarios.
Part 1
On January 1, 20X1, Company X acquired 80% of the 15,000 £1 common shares in Company 123 for
£1.50 per share in cash and gained control. The retained earnings of Company 123 were £5,000 at that time. The fair values of the non-current assets in Company 123 were £1000 above their book value as shown below. The statements of financial position of each company on the December 31, 20X1 were as follows (all figures in £'000):
|
|
Company X
|
Company 123
|
Group
|
|
ASSETS
|
£
|
£
|
£
|
|
Non-current assets
|
30,000
|
14,000
|
?
|
|
Goodwill
|
|
|
?
|
|
Investment in 123
|
18,000
|
|
|
|
Net current assets
|
12,000
|
7,000
|
?
|
|
Total assets
|
60,000
|
21,000
|
?
|
|
Share capital
|
34,000
|
15,000
|
?
|
|
Retained earnings
|
26,000
|
6,000
|
?
|
|
Non-controlling interest
|
|
|
?
|
|
|
60,000
|
21,000
|
?
|
Required:
Prepare the statement of financial position for the group as of December 31, 20X1. This will require that you compute the goodwill, the non-controlling interest, assets/liabilities, and consolidated share capital and reserves.
Your completed statement of financial position should include the amounts of each separate organisation, with a third column for the group (essentially filling in the question marks in the above statement of financial position). You should also provide supporting notes to the statement of financial position that document your calculations.
Part 2
You are given information for two organisations, Acme plc and Generic plc. Acme plc had acquired 80% of the common shares of Generic plc on December 31, 20X8. The individual income statements for each organisation on December 31, 20X9 were as follows (all figure in £'000):
|
|
Acme plc
|
Generic plc
|
Group
|
|
|
£
|
£
|
£
|
|
Sales
|
100,000
|
60,000
|
?
|
|
Cost of goods sold
|
30,000
|
30,000
|
?
|
|
Gross profit
|
70,000
|
30,000
|
?
|
|
Expenses
|
29,541
|
20,000
|
?
|
|
Impairment of goodwill
|
|
|
?
|
|
Profits from operations
|
40,459
|
10,000
|
?
|
|
Dividends received
|
3,200
|
|
?
|
|
Profit before tax
|
43,659
|
10,000
|
?
|
|
Income tax expense
|
7,002
|
3,000
|
?
|
|
Net profit
|
36,657
|
7,000
|
?
|
|
Apportionment of profit
|
|
|
|
|
Ordinary shareholders in Acme
|
|
|
?
|
|
Non-controlling interest in Generic plc
|
|
|
?
|
|
|
Total
|
|
?
|
Additional information:
• During the year 20X9, Acme plc sold Generic plc goods at a cost of £5000 plus 20% mark-up. Generic had 50% of these goods still in stock at the end of the year.
• £1,500 of goodwill is to be written off as an impairment loss.
• Generic plc issued £4,000 worth of dividends on common stock.
Required:
Prepare an income statement (in the same format provided in the text) for the group for the year ended December 31, 20X9. The income statement should show the items for each organisation separately with a third column for the group. You should also have supporting notes to the income statement that document your calculations.