F7 Financial Reporting(INT)

F7 Financial Reporting(INT) - Fundamentals Pilot Paper...

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Financial Reporting (International) Time allowed Reading and planning: 15 minutes Writing: 3 hours ALL FIVE questions are compulsory and MUST be attempted. Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall. Fundamentals Pilot Paper – Skills module Paper F7 (INT) The Association of Chartered Certified Accountants
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2 ALL FIVE questions are compulsory and MUST be attempted 1 On 1 October 2005 Pumice acquired the following non-current investments: 80% of the equity share capital of Silverton at a cost of $13.6 million 50% of Silverton’s 10% loan notes at par 1.6 million equity shares in Amok at a cost of $6.25 each. The summarised draft balance sheets of the three companies at 31 March 2006 are: Pumice Silverton Amok $’000 $’000 $’000 Non-current assets Property, plant and equipment 20,000 8,500 16,500 Investments 26,000 nil 1,500 46,000 8,500 18,000 Current assets 15,000 8,000 11,000 Total assets 61,000 16,500 29,000 Equity and liabilities Equity Equity shares of $1 each 10,000 3,000 4,000 Retained earnings 37,000 8,000 20,000 47,000 11,000 24,000 Non-current liabilities 8% loan note 4,000 nil nil 10% loan note nil 2,000 nil Current liabilities 10,000 3,500 5,000 Total equity and liabilities 61,000 16,500 29,000 The following information is relevant: (i) The fair values of Silverton’s assets were equal to their carrying amounts with the exception of land and plant. Silverton’s land had a fair value of $400,000 in excess of its carrying amount and plant had a fair value of $1.6 million in excess of its carrying amount. The plant had a remaining life of four years (straight-line depreciation) at the date of acquisition. (ii) In the post acquisition period Pumice sold goods to Silverton at a price of $6 million. These goods had cost Pumice $4 million. Half of these goods were still in the inventory of Silverton at 31 March 2006. Silverton had a balance of $1.5 million owing to Pumice at 31 March 2006 which agreed with Pumice’s records. (iii) The net profit after tax for the year ended 31 March 2006 was $2 million for Silverton and $8 million for Amok. Assume profits accrued evenly throughout the year. (iv) An impairment test at 31 March 2006 concluded that consolidated goodwill was impaired by $400,000 and the investment in Amok was impaired by $200,000. (v) No dividends were paid during the year by any of the companies. Required: (a) Discuss how the investments purchased by Pumice on 1 October 2005 should be treated in its consolidated financial statements. (5 marks) (b) Prepare the consolidated balance sheet for Pumice as at 31 March 2006. (20 marks) (25 marks)
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3 2 The following trial balance relates to Kala, a publicly listed company, at 31 March 2006: $’000 $’000 Land and buildings at cost (note (i))
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This note was uploaded on 03/19/2012 for the course ACCT 100 taught by Professor Ayeshab during the Spring '12 term at Alvin CC.

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F7 Financial Reporting(INT) - Fundamentals Pilot Paper...

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