Homework answers / question archive / The following is an extract from the summarised draft statements of financial position for Hector Plc and its subsidiary Sergio Ltd as at 31 December 2020:                                Hector Plc                         Sergio Plc Share capital (£1)                            16,800,000                          12,000,000 Retained earnings                           8,400,000                            4,320,000 Hector Plc acquired 6 million of the shares in Sergio Plc on 1 January 2020 for total consideration of £12 million

The following is an extract from the summarised draft statements of financial position for Hector Plc and its subsidiary Sergio Ltd as at 31 December 2020:                                Hector Plc                         Sergio Plc Share capital (£1)                            16,800,000                          12,000,000 Retained earnings                           8,400,000                            4,320,000 Hector Plc acquired 6 million of the shares in Sergio Plc on 1 January 2020 for total consideration of £12 million

Accounting

Share With

---

The following is an extract from the summarised draft statements of financial position for Hector Plc and its subsidiary Sergio Ltd as at 31 December 2020:

                               Hector Plc                         Sergio Plc

Share capital (£1)                            16,800,000                          12,000,000

Retained earnings                           8,400,000                            4,320,000

Hector Plc acquired 6 million of the shares in Sergio Plc on 1 January 2020 for total consideration of £12 million. The retained earnings of Sergio at that date were £2.8 million. The fair value of the machinery of Sergio was £2.2 million, and its carrying value was £ 1.2 million at the date of acquisition. Its remaining useful life was 5 years at that date.

Calculate the amount of Net assets of the subsidiary at the acquisition date by filling in the blanks:

Net asset of the subsidiary at the acquisition date is calculated as Share capital £ Blank 1 plus Retained earnings £ Blank 2 plus any Fair value adjustment £ Blank 3.

Depreciation adjustment at the year ending December 2020 is £ Blank 4.

Post- acquisition profits amount to be used in the calculation of NCI and Group RE is £ Blank 5.

 

 

 

 

Gino Plc purchased 80% of Nino's Plc 2 million £1 shares on 1st January 2020. Consideration comprised of £2,000,000 cash at the acquisition date and £1,500,000 of cash payable on 1st January 2022. Part of consideration was also 2 shares in Gino Plc for every 5 shares purchased in Nino Plc. The market value of Gino's and Nino's shares as at 1st January 2020 were £3 and £2 respectively.

The fair value of Nino's net assets as at 1st January 2020 was £4,300,000, and the non-controlling interest in Nino was measured a fair value. Gino Plc has a cost of capital of 10%. DF 0.826.

Calculate the amount of goodwill to be shown in the statement of financial position as at 31st December 2020 by filling in the blanks:

Consideration is calculated as the total of cash £ Blank 1 plus deferred cash £ Blank 2 plus shares £ Blank 3.

The amount of NCI at the acquisition date is £ Blank 4. Net assets at the acquisition date is £ Blank 5. Goodwill amount to be presented in the consolidated statement of financial position is £ Blank 6.

 

 

 

 

 

 

Orton Plc has owned 80% of the share capital of Tucker Plc for many years. Retained earnings of Tucker Plc for the year end 31st December 2020 are £2,800,000.

Orton Plc bought 35% of the share capital of Cooper Plc on 1st January 2020 at cost of £2,300,000. Cooper has made a profit for the year ended 31st Dec 2020 of £1,000,000 and has sold goods to Orton Plc during the year with a sales value of £360,000. All sales were at a margin of 20% and half of them remain in year-end inventories. Orton Plc has retained earnings at 31st December 2020 of £4,500,000.

Complete the statements below by filling in the blanks:

The amount of investment in Cooper to be shown in the consolidated statement of financial position for the year ended 31 December is £ Blank 1.

The share of profits of Cooper to be shown in the consolidated statement of profit or loss for the year ended 31 December 2020 is £ Blank 2.

To calculate the group retained earnings the following amounts needs to be included.

Parent RE £ Blank 3; Parent share of subsidiary post acquisition RE £ Blank 4; parent share of associates post acquisition RE £ Blank 5 and any adjustments £ Blank 6.

Group retained earnings to be shown in the consolidated statement of financial position is £ Blank 7.

 

 

 

 

 

Which of the following statement is/are true?

i. In the consolidated statement of profit or loss, the unrealised profit adjustment will increase the cost of sales

ii. In the consolidated statement of profit or loss, the unrealised profit adjustment will decrease the cost of sales

iii. In the consolidated statement of profit or loss, the unrealised profit adjustment will decrease the non- controlling interest if the subsidiary is the seller

iv. In the consolidated statement of profit or loss, the unrealised profit adjustment will decrease the non-controlling interest if the parent is the seller

 

 

 

 

 

An associate is an entity in which an investor has significant influence over the investee. Which TWO of the following indicate the presence of significant influence?