B407F Mid-term revision solution

B407F Mid-term revision solution - B407F Mid-term revision...

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B407F Mid-term revision solution Question 1 (a) Consolidation adjustments Debit Credit $000 $000 Elimination of investment Share capital 5,000 Retained earnings at acquisition (1,300-800) 500 Contingent assets 500 800 Goodwill arising on consolidation 490 Investment in Fork 5,250 NCI (5,000 + 500 + 500 + 800)x30% 2,040 (W1-Elimination of investment in subsidiary) Administration expenses 160 160 Revenue 300 Cost of sales (Purchases) 300 Cost of sales 100 Inventories (300 x 50/150) 100 (W4 – Elimination of inter-company sale of inventory) Profit for the year – gain on disposal of fixed assets 100 Plant and equipment 100 Plant and equipment (100/5) 20 Administration expenses (Depreciation) 20 (W5-Elimination of inter-company sale of non-current depreciable assets) Dividend income 70 NCI 30 Dividend paid 100 (W3 – Elimination of inter-company dividend) Statement of Income 168 NCI 168 (900 – 160 dep – 100 inv – 100gain + 20 dep ) = 560 x 30% (W6 NCI's share of post acquisition profits) Cash in transit 100 Current account with Knife 100 1
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Current account with Fork 200 Current account with Knife 200 ( Being elimination of inter-company a/c balance) (b) Consolidated Income Statement for the year ended 31 December Year 3 $000 Revenue (2640+1640-300) 3,980 Cost of sales (1516 + 680 + 100-300) (1, 996 ) Gross profit 1,984 Selling and distribution expenses
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B407F Mid-term revision solution - B407F Mid-term revision...

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