On 1 January 2011, Long John Ltd acquired 80% of the ordinary shares of a subsidiary,...

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On 1 January 2011, Long John Ltd acquired 80% of the ordinary shares of a subsidiary, Silver Inc for 600,000. Silver Inc does its accounts in a currency called "bans". On 1 January 2011, the retained profits account of Silver Inc shows 192,000 "bans" and the share capital of Silver Inc was 1,440,000 "bans". A summary of the statement of comprehensive income and statement of financial position of Silver Inc are as follows: Statement of comprehensive income for year ended 31 December 2022 "bans" Revenue "bans" 684,000 Cost of sales Opening inventory 90,000 Purchases 360,000 Closing inventory (135,000) 315,000 Gross profit 369,000 Depreciation (36,000) Other expenses (9,000) Profit before tax 324,000 Tax (63,000) Profit after tax 261,000 Statement of financial position as at 31 December 2022 "bans" Non-current assets 3,240,000 Inventories 135,000 Cash 549,000 Net Assets 3,924,000 Share capital 2,160,000 Retained profit 1,764,000 Total equity 3,924,000 The following information is also available: 1. The retained earnings brought forward after translation for Silver Inc is 179.100 under the temporal method and 358,200 under the closing rate method. 2. Impairment of 20% of the value of the goodwill is to be provided for only in 2022. 3. Non-current assets were all acquired on 1 January 2011. 4. Opening inventories were acquired on 12 November 2021 and closing inventories were acquired on 15 December 2022. 5. Exchange rates are as follows 1 January 2011 12 November 2021 1 January 2022 average for 2022 1 10 "bans" 1=5 "bans" 1=6 "bans" 1 = 4 "bans" 1=2 "bans" 31 December 2022 1-3 "bans" 15 December 2022 Required: a) Translate the statement of comprehensive income for the year ended 31 December 2022 and the statement of financial position as at 31 December 2022 for Silver Inc using the temporal method. (12 marks) b) Calculate the goodwill in the consolidated statement of financial position for Long John Ltd as at 31 December 2022 using the temporal method. (4 marks) c) Discuss why the Temporal method would be chosen for translation of Silver Inc's Financial Statements. (4 marks) On 1 January 2011, Long John Ltd acquired 80% of the ordinary shares of a subsidiary, Silver Inc for 600,000. Silver Inc does its accounts in a currency called "bans". On 1 January 2011, the retained profits account of Silver Inc shows 192,000 "bans" and the share capital of Silver Inc was 1,440,000 "bans". A summary of the statement of comprehensive income and statement of financial position of Silver Inc are as follows: Statement of comprehensive income for year ended 31 December 2022 "bans" Revenue "bans" 684,000 Cost of sales Opening inventory 90,000 Purchases 360,000 Closing inventory (135,000) 315,000 Gross profit 369,000 Depreciation (36,000) Other expenses (9,000) Profit before tax 324,000 Tax (63,000) Profit after tax 261,000 Statement of financial position as at 31 December 2022 "bans" Non-current assets 3,240,000 Inventories 135,000 Cash 549,000 Net Assets 3,924,000 Share capital 2,160,000 Retained profit 1,764,000 Total equity 3,924,000 The following information is also available: 1. The retained earnings brought forward after translation for Silver Inc is 179.100 under the temporal method and 358,200 under the closing rate method. 2. Impairment of 20% of the value of the goodwill is to be provided for only in 2022. 3. Non-current assets were all acquired on 1 January 2011. 4. Opening inventories were acquired on 12 November 2021 and closing inventories were acquired on 15 December 2022. 5. Exchange rates are as follows 1 January 2011 12 November 2021 1 January 2022 average for 2022 1 10 "bans" 1=5 "bans" 1=6 "bans" 1 = 4 "bans" 1=2 "bans" 31 December 2022 1-3 "bans" 15 December 2022 Required: a) Translate the statement of comprehensive income for the year ended 31 December 2022 and the statement of financial position as at 31 December 2022 for Silver Inc using the temporal method. (12 marks) b) Calculate the goodwill in the consolidated statement of financial position for Long John Ltd as at 31 December 2022 using the temporal method. (4 marks) c) Discuss why the Temporal method would be chosen for translation of Silver Inc's Financial Statements. (4 marks)

Answer rating: 100% (QA)

To analyze the given information we need to consider the following Acquisition Long John Ltd acquired 80 of the ordinary shares of Silver Inc for 6000... View the full answer