ACW366 - Tutorial Exercises 4 PDF

Tutorial Exercises 4
5 Ho plc
The following is the draft statement of financial position information of Ho plc and Su Ltd, as on 30
September 20X2.
Ho plc Su Ltd
£ £
Ordinary £1 shares 2,600,000 1,000,000
Retained earnings 750,000 700,000
Trade payables 350,000 900,000
Other payables =– 100,000
3,700,000 2,700,000
Total assets 3,700,000 2,700,000
Ho plc acquired 60% of the share capital of Su Ltd several years ago when Su Ltd’s retained earnings
were £300,000. Su Ltd has not yet accounted for the estimated audit fee for the year ended 30
September 20X2 of £40,000.
Requirement
What should the amount of consolidated retained earnings be on 30 September 20X2?
6 Oxford Ltd
Oxford Ltd owns 100% of the issued share capital of Cambridge Ltd, and sells goods to its subsidiary
at a profit margin of 20%. At the year end their statements of financial position showed inventories of
Oxford Ltd £290,000
Cambridge Ltd £160,000
The inventory of Cambridge Ltd included £40,000 of goods supplied by Oxford Ltd and there was
inventory in transit from Oxford to Cambridge amounting to a further £20,000.
Requirement
At what amount should inventory be carried in the consolidated statement of financial position?
7 Rugby Ltd
Rugby Ltd has a 75% subsidiary, Stafford Ltd, and is preparing its consolidated statement of financial
position as on 31 December 20X6. The carrying amount of property, plant and equipment in the two
companies at that date is as follows.
Rugby Ltd — £260,000
Stafford Ltd — £80,000
On 1 January 20X6 Stafford Ltd had transferred some equipment to Rugby Ltd for £40,000. At the
date of transfer the equipment, which had cost £42,000, had a carrying amount of £30,000 and a
remaining useful life of five years. The group accounting policy is to depreciate equipment on a
straight-line basis down to a nil residual value.
Requirement
What figure should be disclosed as the carrying amount of property, plant and equipment in the
consolidated statement of financial position of Rugby Ltd as on 31 December 20X6?
8 Lynton Ltd
Lynton Ltd acquired 75% of the 200,000 £1 ordinary shares and 50% of the 100,000 £1 redeemable
preference shares of Pinner Ltd when its retained earnings were £24,000. The retained earnings of
Lynton Ltd and Pinner Ltd are now £500,000 and £60,000 respectively.
ICAEW 2021 11: Consolidated statement of financial position 537

Requirement
What figures for non-controlling interest and consolidated retained earnings should be included in
the current consolidated statement of financial position?
9 Hill plc
Hill plc owns 60% of the ordinary share capital of Down plc and all of its 10% borrowings. The
following transactions have been recorded by Down plc as at 31 December 20X3.
Half year’s interest due: £15,000
Interim dividend paid: £50,000
Hill plc has not yet accounted for the interest receivable from Down plc.
Requirement
In preparing the consolidated statement of financial position for Hill plc and its subsidiary at 31
December 20X3, what adjustments are required in respect of intra-group dividends and debenture
interest?
10 Nasty Ltd
Nasty Ltd and Horrid Ltd are wholly-owned subsidiaries of Ugly Ltd. Inventory in their individual
statements of financial position at the year end is shown as follows.
Ugly Ltd: £30,000
Horrid Ltd: £10,000
Nasty Ltd: £20,000
Sales by Horrid Ltd to Nasty Ltd during the year were invoiced at £15,000, which included a profit to
Horrid Ltd of 25% on cost. Two thirds of these goods were in inventory at the year end.
Requirement
At what amount should inventory appear in the consolidated statement of financial position?
11 Fallin Ltd
Fallin Ltd acquired 100% of the share capital of Gaydon Ltd for £150,000 on 1 May 20X6. Equity at 30
April was as follows.
Fallin Ltd Gaydon Ltd

20X7 20X7 20X6
£ £ £
Ordinary share capital 100,000 50,000 50,000
Revaluation surplus - 25,000 15,000
Retained earnings 340,000 135,000 25,000
440,000 210,000 90,000
An impairment review at 30 April 20X7 revealed that goodwill acquired in the business combination
with Gaydon Ltd had become impaired by £6,000 in the year.
Requirement
What should the consolidated equity of the Fallin Ltd group be on 30 April 20X7?
12 VW plc
With reference to the information below, answer the requirements with respect to the consolidated
financial statements of VW plc.
538 Financial Accounting and Reporting − IFRS ICAEW 2021

Summarised statements of financial positionas at 30 September 20X7
VW plc Polo Ltd Golf Ltd

£ £ £
ASSETS
Property, plant and equipment 200,000 40,000 30,000
Investments
100,000 shares in Polo Ltd 150,000 – –
40,000 shares in Golf Ltd 70,000 – –
Current assets
Inventories 150,000 90,000 80,000
Trade receivables 250,000 40,000 20,000
Cash 50,000 20,000 10,000
870,000 190,000 140,000
EQUITY AND LIABILITIES
Equity
Ordinary shares of £1 each 500,000 100,000 50,000
Total equity 590,000 140,000 120,000
Current liabilities 280,000 50,000 20,000
870,000 190,000 140,000
Notes
1 VW plc acquired its shares in Polo Ltd on 1 October 20X5 when Polo Ltd’s retained earnings were
£30,000.
2 VW plc acquired its shares in Golf Ltd on 30 September 20X6. Golf Ltd’s net profit for the year
ended 30 September 20X7 was £30,000.
3 It is the policy of the VW group to measure goodwill and the non-controlling interest using the
proportionate basis.
4 Included in Polo Ltd’s inventory at 30 September 20X7 was £15,000 of goods purchased from
VW plc during the year. VW plc invoiced Polo Ltd at cost plus 50%.
5 During the year ended 30 September 20X7 Polo Ltd sold goods costing £50,000 to Golf Ltd for
£70,000. Golf Ltd still had half of these goods in inventory at 30 September 20X7.
6 The following intra-group balances are reflected in the above statement of financial position of
VW plc at 30 September 20X7.
£20,000 receivable from Polo Ltd
£10,000 payable to Golf Ltd
Requirements
12.1 What should the amount of non-controlling interest be?
12.2 What is the total of group inventories?
12.3 What is group trade receivables?
12.4 What amount of goodwill should be included under intangible assets?
12.5 Consolidated retained earnings should be presented at what amount?

13 Dublin Ltd
The following are the summarised statements of financial position of a group of companies as at 31
December 20X9.
Dublin Ltd Shannon Ltd Belfast Ltd

£ £ £
ASSETS
Non-current assets
Property, plant and equipment 90,000 60,000 50,000
Investments: 40,000 £1 shares in
Shannon 50,000 – –
12,000 6% loan notes of Shannon 12,000
30,000 £1 shares in Belfast 45,000 – –
197,000 60,000 50,000
Current assets 203,000 70,000 30,000
Total assets 400,000 130,000 80,000
Equity
Ordinary share capital 190,000 50,000 40,000
Revaluation surplus – 10,000 –
Total equity 250,000 90,000 56,000
Non-current liabilities – loan notes 20,000
Current liabilities 150,000 20,000 24,000
Total equity and liabilities 400,000 130,000 80,000
Dublin Ltd purchased its shares and loan notes in Shannon Ltd five years ago when there were
retained earnings of £20,000 and a balance on its revaluation surplus of £10,000.
Belfast Ltd had retained earnings of £16,000 when Dublin Ltd acquired its shares on 1 January
20X9.
At the end of 20X9 the goodwill impairment review revealed a loss of £300 in relation to the
goodwill acquired in the business combination with Belfast Ltd.
During November 20X9, Shannon Ltd had sold goods to Belfast Ltd for £12,000 at a mark-up on cost
of 20%. Half of these goods were still held by Belfast Ltd at 31 December 20X9.
Dublin Ltd prefers to measure goodwill and the non-controlling interest using the proportionate
method wherever possible.
Requirement
Prepare the consolidated statement of financial position as at 31 December 20X9 of Dublin Ltd and
its subsidiaries.
Total: 12 marks
14 Close Ltd
The summarised statements of financial position of Close Ltd and Steele Ltd as at 31 December
20X9 were as follows.

Close Ltd Steele Ltd
£ £ £ £
ASSETS
Non-current assets
Property, plant and equipment 80,000 58,200
Investments 84,000 –
164,000 58,200
Current assets
Inventories 18,000 12,000
Trade and other receivables 62,700 21,100
Investments – 2,500
Cash and cash equivalents 10,000 3,000
Current account – Close Ltd – 3,200
90,700 41,800
Total assets 254,700 100,000
Equity
Ordinary share capital (£1 shares) 120,000 60,000
Share premium account 18,000 –
Revaluation surplus 23,000 16,000
Retained earnings 56,000 13,000
Total equity 217,000 89,000
Current liabilities
Trade and other payables 35,000 11,000
Current account – Steele Ltd 2,700 –
37,700 11,000
Total equity and liabilities 254,700 100,000
The following information is relevant.

(1) On 1 January 20X7 Close Ltd acquired 48,000 shares in Steele Ltd for £84,000 cash when the
retained earnings of Steele Ltd were £8,000 and the balance on the revaluation surplus was
£16,000.
(2) At the acquisition date Steele Ltd disclosed a contingent liability as a potential £300,000,
although its fair value was assessed at £58,000. A final decision on this matter is expected to be
reached within the next 12 months.
(3) The inventories of Close Ltd include £4,000 of goods from Steele Ltd invoiced to Close Ltd at
cost plus 25%.
(4) A cheque for £500 from Close Ltd to Steele Ltd, sent before 31 December 20X9, was not
received by the latter company until January 20Y0.
(5) An impairment review at 31 December 20X9 revealed that an impairment loss of £500 in respect
of goodwill on the acquisition of Steele Ltd needs to be recognised. By 1 January 20X9 this
goodwill had already suffered impairments totalling £1,700.
(6) The non-controlling interest and goodwill arising on the acquisition of Steele Ltd were both
calculated using the proportionate method.

Requirements
14.1 Prepare the consolidated statement of financial position of Close Ltd and its subsidiary Steele
Ltd as at 31 December 20X9.
14.2 Explain the adjustments necessary in respect of intra-group sales when preparing the
consolidated statement of financial position of the Close Ltd group.
Total: 18 marks
Now go back to the Introduction and ensure that you have achieved the Learning outcomes listed for
this chapter.

ACW366 - Tutorial Exercises 4 PDF

Uploaded by

Copyright:

Available Formats

ACW366 - Tutorial Exercises 4 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ACW366 - Tutorial Exercises 4 PDF

Uploaded by

Copyright:

Available Formats

Tutorial Exercises 4

ICAEW 2021 11: Consolidated statement of ﬁnancial position 537

Fallin Ltd Gaydon Ltd

538 Financial Accounting and Reporting − IFRS ICAEW 2021

VW plc Polo Ltd Golf Ltd

ICAEW 2021 11: Consolidated statement of ﬁnancial position 539

Dublin Ltd Shannon Ltd Belfast Ltd

540 Financial Accounting and Reporting − IFRS ICAEW 2021

The following information is relevant.

ICAEW 2021 11: Consolidated statement of ﬁnancial position 541

542 Financial Accounting and Reporting − IFRS ICAEW 2021

You might also like