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Homework answers / question archive / 1) 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
1) 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.
2. 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.
3. 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.
