Homework answers / question archive / a) The following summarized trial balances pertain to Takoradi Ltd and its subsidiary Accra Ltd for the year ended 31 December 2018:   Takoradi Ltd                                                                           Accra Ltd     Derbit Credit Derbit Credit   GH?m GH?m GH?m GH?m Sales   5,177   3,996 Cost of sales 3,255   2,448   Operating expenses 713   636   Other income   350   18 Tax expense 403   288   Share capital   3,720   1,600 Share premium   1,430   322 Retained earnings as at 1 January 2018   2,293   516 Current liabilities   713   651 Property, plant and equipment 5,418   1,934   Investments 1,600       Loan to AL's Director 10       Current assets 2,284 1,797 2,284         13,683 13,683 7,103 7,103 Additional information: (i) Takoradi Ltd acquired 96 million shares of Accra Ltd on 1 May 2018 at following consideration: Cash payment of GH? 450 million and Issuance of 40 million shares of Takoradi Ltd at GH? 25 each (ii) On acquisition date, carrying values of Accra Ltd's net assets were equal to fair value except the following: • A building whose fair values and value-in-use were GH? 390 million and GH? 520 million respectively as against carrying value of GH? 480 million

a) The following summarized trial balances pertain to Takoradi Ltd and its subsidiary Accra Ltd for the year ended 31 December 2018:   Takoradi Ltd                                                                           Accra Ltd     Derbit Credit Derbit Credit   GH?m GH?m GH?m GH?m Sales   5,177   3,996 Cost of sales 3,255   2,448   Operating expenses 713   636   Other income   350   18 Tax expense 403   288   Share capital   3,720   1,600 Share premium   1,430   322 Retained earnings as at 1 January 2018   2,293   516 Current liabilities   713   651 Property, plant and equipment 5,418   1,934   Investments 1,600       Loan to AL's Director 10       Current assets 2,284 1,797 2,284         13,683 13,683 7,103 7,103 Additional information: (i) Takoradi Ltd acquired 96 million shares of Accra Ltd on 1 May 2018 at following consideration: Cash payment of GH? 450 million and Issuance of 40 million shares of Takoradi Ltd at GH? 25 each (ii) On acquisition date, carrying values of Accra Ltd's net assets were equal to fair value except the following: • A building whose fair values and value-in-use were GH? 390 million and GH? 520 million respectively as against carrying value of GH? 480 million

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a) The following summarized trial balances pertain to Takoradi Ltd and its subsidiary Accra Ltd for the year ended 31 December 2018:

	Takoradi Ltd		Accra Ltd
	Derbit	Credit	Derbit	Credit
	GH?m	GH?m	GH?m	GH?m
Sales		5,177		3,996
Cost of sales	3,255		2,448
Operating expenses	713		636
Other income		350		18
Tax expense	403		288
Share capital		3,720		1,600
Share premium		1,430		322
Retained earnings as at 1 January 2018		2,293		516
Current liabilities		713		651
Property, plant and equipment	5,418		1,934
Investments	1,600
Loan to AL's Director	10
Current assets 2,284 1,797	2,284
	13,683	13,683	7,103	7,103

Additional information:

(i) Takoradi Ltd acquired 96 million shares of Accra Ltd on 1 May 2018 at following consideration: Cash payment of GH? 450 million and Issuance of 40 million shares of Takoradi Ltd at GH? 25 each

(ii) On acquisition date, carrying values of Accra Ltd's net assets were equal to fair value except the following: • A building whose fair values and value-in-use were GH? 390 million and GH? 520 million respectively as against carrying value of GH? 480 million. The group follows cost model for subsequent measurement of property, plant and equipment. The remaining life of building on acquisition date was 20 years. Fair value of the building has increased to GH? 440 million at 31 December 2018. • A brand which had not been recognized by Accra Ltd. The fair value of the brand was assessed at GH? 162 million. It is estimated that benefit would be obtained from the brand for the next 6 years.

(iii) Takoradi Ltd measures the non-controlling interest at fair value. On the date of acquisition, the market price of Accra Ltd's shares was GH? 14 per share.

(iv) On 1 July 2018 Takoradi Ltd sold an equipment to Accra Ltd for GH? 250 million at a gain of GH? 20 million. Accra Ltd has charged depreciation of GH? 12.5 million on this equipment.

(v) In each month of 2018, Accra Ltd sold goods costing GH? 40 million to Takoradi Ltd at cost plus 20%. At year end, 75% of the goods purchased in December were included in stock of Takoradi Ltd.

(vi) Accra Ltd's credit balance of GH? 38 million in Takoradi Ltd’s books does not agree with Accra Ltd's books due to GH? 7 million charged by Takoradi Ltd for management service on 26 December 2018. Total management fee charged by Takoradi Ltd to Accra Ltd since acquisition amounted to GH? 16 million.

(vii) Accra Ltd declared interim cash dividend of GH? 0.50 per share in December 2018. Takoradi Ltd has correctly recorded the dividend in its books. However, Accra Ltd has not yet accounted for the dividend.

(viii) The incomes and expenses of Accra Ltd may be assumed to have accrued evenly during the year.

Required: Prepare the following:

i. Consolidated statement of profit or loss for the year ended 31 December 2018. [12 marks]

ii. Consolidated statement of financial position as at 31 December 2018. [15marks] b) IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to Page 5 of 6 consolidate entities it controls. State how IFRS 10 Consolidated Financial Statements determines elements of control of an investor over investee. [3 mark]