On 1 April 2021 Sun plc acquired the following investments: 70% ordinary shares in Earth Ltd at
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Question:
On 1 April 2021 Sun plc acquired the following investments:
- 70% ordinary shares in Earth Ltd at a cost of 400 million.
- 30% ordinary shares in Mercury at a cost of 80 million.
Draft statements for these three companies as at 30 September 2021 are summarized below:
Sun | Earth | Mercury | |
£000 | £000 | £000 | |
Assets | |||
Non-current assets | |||
Property, plant and equipment | 360,000 | 270,000 | 190,000 |
Investments in Earth (at cost) | 400,000 | - | |
Investments in Mercury (at cost) | 80,000 | ||
Current assets | |||
Inventory | 165,000 | 102,000 | 120,000 |
Accounts receivables | 114,000 | 54,000 | 80,000 |
Cash and cash equivalents | 30,000 | 15,000 | 5,000 |
Total assets | 1,149,000 | 441,000 | 395,000 |
Equity | |||
Ordinary Shares | 600,000 | 240,000 | 180,000 |
Retained earnings | 186,000 | 135,000 | 130,000 |
Liabilities | |||
Non-current liabilities | |||
Loan | 253,000 | 48,000 | 30,000 |
Current liabilities | 110,000 | 18,000 | 55,000 |
Total equity and liabilities | 1,149,000 | 441,000 | 395,000 |
Continued Overleaf
The following additional information is given:
- On 1 April 2021 the fair value of Earth’s assets was equal to their carrying value other than land and the value of its brand name.
- During negotiations it has been established that the fair value of the land was £6,000,000 in excess of its carrying value and the brand name fair value was £1,700,000. The brand name was considered to have an indefinite life. Neither have been reflected in the above statements. An impairment test on 30 September 2021 concluded that the consolidated goodwill was impaired by £360,000.
- The net profit after tax for the year ended 30 September 2021 was £84 million for Earth and £65 million for Mercury. Profits accrue evenly throughout the year.
- No dividends were paid during the year by any of the companies and their share capital is unchanged since 1 April 2021.
- Non-controlling interests in any subsidiaries are to be measured at the appropriate proportion of the subsidiaries’ identifiable net assets.
- Sun’s own financial statements reflect investments at cost.
Required:
- Prepare the consolidated statement of financial position for the Sun plc group as at 30 September 2021.
Related Book For
International Financial Reporting And Analysis
ISBN: 9781473766853
8th Edition
Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn
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