B407F Week 4 Tutorial Question

B407F Week 4 Tutorial Question - B407F Week 4...

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B407F Week 4 Tutorial -Consolidated Financial Statements (1) Question 1 HKFRS 3 Business combinations permits a non-controlling interest at the date of acquisition to be valued net assets or fair value approach. (a) Explain the nature of non-controlling interest and how it should be reported in the consolidated financial statements. (b) Explain the difference that the accounting treatment of these alternative methods could have on the consolidated financial statements. Question 2 (Head and Shoulder) Statement of Financial Position after acquisition: Head Limited Shoulder Limited $m $m $m $m Tangible non-current assets 600 180 Investment in Shoulder 640 Current assets Cash 950 500 Accounts Receivable 700 420 Inventories 200 1,850 100 1,020 Total assets 3,090 1,200 Share Capital ($1 each) 1,300 400 Share Premium 450 - Retained Profits: At acquisition 450 300 After acquisition 400 200 Total equity 2,600 900 Current liabilities Accounts payable 400 300 Accruals 90 490 - 300 Total equity and liabilities 3,090 1,200 Head Limited (Head) acquired 80% the shares in Shoulder Limited (Shoulder) by an exchange of one share in Head for every two share in Shoulder, plus $0.5 per acquired Shoulder share in cash. The market price of each Head’s share at the date of acquisition 1
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was $3, and the market price of each Shoulder’s share at the date of acquisition was $2. At the date of acquisition, the fair values of Shoulder’s assets were equal to their carrying
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B407F Week 4 Tutorial Question - B407F Week 4...

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