On 1 October 20X0, Paladin secured a majority equity shareholding in Saracen on the following terms....

  

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On 1 October 20X0, Paladin secured a majority equity shareholding in Saracen on the following terms. An immediate payment of S4 per share on 1 October 20X0; and a further amount deferred until 1 October 20X1 of $5.4 million. The immediate payment has been recorded in Paladin's financial statements, but the deferred payment has not been recorded. Paladin's cost of capital is 8% per annum, giving the deferred payment a current cost at 1 October 20X0 of $5 million. On 1 February 20X1, Paladin also acquired 25% of the equity shares of Augusta paying $10 million in cash. The summarised statements of financial position of the three companies at 30 September 20X1 are: Assets Non-current assets Property, plant and equipment Intangible assets Investments - Saracen (8 million shares at $4 each) - Augusta Current assets Inventory Trade receivables Bank Total assets Equity and liabilities Equity Equity shares of $1 cach Retained camnings- at 1 October 20X0 - for year ended 30 September 20X1 Paladin $'000 40,000 Saracen 5000 11,200 7,400 3,400 111.500 31,000 7,500 32,000 10,000 nil 89.500 31,000 8,400 5,300 44.700 50,000 10,000 25,700 12,000 9.200 6,000 84,900 28,000 Augusta $'000 30,000 nil 30,000 10,000 5.000 2,000 47,000 10,000 31,800 1,200 43,000 Non-current liabilities Deferred tax Current liabilities Bank Trade payables Total equity and liabilities 15,000 11,600 111,500 8,000 2,500 6,200 44,700 1,000 nil 3.000 47,000 The following information is relevant: (1) Paladin's policy is to value the non-controlling interest at fair value at the date of acquisition. The directors of Paladin considered the fair value of the non-controlling interest in Saracen to be $7 million. (ii) At the date of acquisition, the fair values of Saracen's property, plant and equipment was equal to its carrying amount with the exception of Saracen's plant which had a fair value of $4 million above its carrying amount. At that date the plant had a remaining life of four years. Saracen uses straight-line depreciation for plant assuming a nil residual value. Also at the date of acquisition, Paladin valued Saracen's customer relationships as a customer base intangible asset at fair value of $3 million. Saracen has not accounted for this asset. Trading relationships with Saracen's customers last on average for six years. (iii) At 30 September 20X1, Saracen's inventory included goods bought from Paladin (at cost to Saracen) of $2.6 million. Paladin had marked up these goods by 30% on cost. Paladin's agreed current account balance owed by Saracen at 30 September 20X1 was $1.3 million. (iv) Impairment tests were carried out on 30 September 20X1 which concluded that consolidated goodwill was not impaired, but, due to disappointing carnings, the value of the investment in Augusta was impaired by $2.5 million. (v) Assume all profits accrue evenly through the year. Required Prepare the consolidated statement of financial position for Paladin as at 30 September 20X1. On 1 October 20X0, Paladin secured a majority equity shareholding in Saracen on the following terms. An immediate payment of S4 per share on 1 October 20X0; and a further amount deferred until 1 October 20X1 of $5.4 million. The immediate payment has been recorded in Paladin's financial statements, but the deferred payment has not been recorded. Paladin's cost of capital is 8% per annum, giving the deferred payment a current cost at 1 October 20X0 of $5 million. On 1 February 20X1, Paladin also acquired 25% of the equity shares of Augusta paying $10 million in cash. The summarised statements of financial position of the three companies at 30 September 20X1 are: Assets Non-current assets Property, plant and equipment Intangible assets Investments - Saracen (8 million shares at $4 each) - Augusta Current assets Inventory Trade receivables Bank Total assets Equity and liabilities Equity Equity shares of $1 cach Retained camnings- at 1 October 20X0 - for year ended 30 September 20X1 Paladin $'000 40,000 Saracen 5000 11,200 7,400 3,400 111.500 31,000 7,500 32,000 10,000 nil 89.500 31,000 8,400 5,300 44.700 50,000 10,000 25,700 12,000 9.200 6,000 84,900 28,000 Augusta $'000 30,000 nil 30,000 10,000 5.000 2,000 47,000 10,000 31,800 1,200 43,000 Non-current liabilities Deferred tax Current liabilities Bank Trade payables Total equity and liabilities 15,000 11,600 111,500 8,000 2,500 6,200 44,700 1,000 nil 3.000 47,000 The following information is relevant: (1) Paladin's policy is to value the non-controlling interest at fair value at the date of acquisition. The directors of Paladin considered the fair value of the non-controlling interest in Saracen to be $7 million. (ii) At the date of acquisition, the fair values of Saracen's property, plant and equipment was equal to its carrying amount with the exception of Saracen's plant which had a fair value of $4 million above its carrying amount. At that date the plant had a remaining life of four years. Saracen uses straight-line depreciation for plant assuming a nil residual value. Also at the date of acquisition, Paladin valued Saracen's customer relationships as a customer base intangible asset at fair value of $3 million. Saracen has not accounted for this asset. Trading relationships with Saracen's customers last on average for six years. (iii) At 30 September 20X1, Saracen's inventory included goods bought from Paladin (at cost to Saracen) of $2.6 million. Paladin had marked up these goods by 30% on cost. Paladin's agreed current account balance owed by Saracen at 30 September 20X1 was $1.3 million. (iv) Impairment tests were carried out on 30 September 20X1 which concluded that consolidated goodwill was not impaired, but, due to disappointing carnings, the value of the investment in Augusta was impaired by $2.5 million. (v) Assume all profits accrue evenly through the year. Required Prepare the consolidated statement of financial position for Paladin as at 30 September 20X1.

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Answer Consolidated statement of financial position for Paladin as at 30 September ... View the full answer