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B407F Week 14 Revision solution

B407F Week 14 Revision solution - B407F Advanced Financial...

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1 B407F Advanced Financial Reporting and Analysis I Final Revision Exercise-Solution Question 1 (i) Consolidated Income Statement as at 31 December 2008 $000 Revenue (24,000 + 9,000 – 200) 32,800 Cost of sales (16,000+5,140 – 200 +8) (20,948) Gross profit 11,852 Selling and distribution costs (4,750) Administrative expenses (3,414 + 686 – 10) (4,090) Finance costs (100) Share of profit of associate 352 Profit before tax 3,264 Income tax expenses - Group 710 Associate 64 (774) Profit for the year 2,490 Attributable to: Equity holders of the parent (1,664-464-100-8 +10) = 1,102+ (1100 x 80%) + (352-64) 2,270 NCI 220 (ii) Consolidated Statement of Financial Position as at 31 December 2008 $000 Non-current assets Goodwill arising on consolidation 200 Land (8,560 + 5,000 +500) 14,060 Plant and equipment (4900+3000-100+10) 7,810 Investment in associate 2,304 24,374 Current assets Inventories (250 + 650 -8) 892 Accounts receivable 310 Cash 140 1,342 Total assets 25,716 EQUITY Share capital 6,000 Retained earnings 11,590 17,590 Non-controlling interest 1,130 Total equity 18,720
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2 Non-current liabilities 6% debenture 2,000 Long-term loan 3,800 5,800 Current liabilities Accounts payables 1,196 Total liabilities 6,996 Total equity and liabilities 25,716 Working: (i) Goodwill arising on consolidation: $000 Cost of investment 4,200 NCI at acquisition 1,000 Share capital 3,000 Retained earnings at acquisition (2150-650) 1,500 Fair value adjustment on land 500 (5,000) Goodwill 200 (ii) Investment in associate – Cab Limited $000 Cost 1,800 Add: share of post acquisition profits (3,060-1800)x 40% 504 2,304 (iii) Non-controlling interest in Best Limited $000 Fair value of NCI at acquisition 1,000 Retained earnings 650 (20%) 130 1,130 (iv) Retained earnings for the year $000 $000 Ace 10,664 Less: sale of equipment (100-10) (90) Unrealized profit in inventory (8) 10,566 Add: Best’s profit for the year (650 x 80%) 520 Cab Profit for the year (3,060-1800)x 40% 504 1,024 11,590
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3 For reference only Consolidation adjustments to arrive at the opening consolidated financial statements at 1 January 2008: Debit Credit $000 $000 Investment in Cab Limited 320 Retained earnings 320 (3,060-1,800-460) = 800x 40% Consolidation adjustments for the year ended at 31 December 2008: Debit Credit $000 $000 Share Capital 3,000 Retained earnings – as at 1 January 2008 (2150-650) 1,500 Land 500 Goodwill 200 Cost of investment in Best 4,200 NCI 1,000 Sales (Revenue) 200 Cost of sales (Purchases) 200 Profit for the year – cost of sales 8 Inventory 8 Dividend Income 360 NCI 90 Profit for the year 450 Profit for the year – gain on disposal of fixed assets 100 Plant and Equipment 100 Plant and Equipment (Depreciation) 10 Profit for the year 100/10 10 Profit for the year 220 NCI (1,100 x 20%) 220 Investment in Cab Limited 352 Profit for the year 352 Taxation 64 Investment in Cab Limited 64 Dividend Income 104 Investment in Cab Limited 104
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