Pop acquired 80% of the equity share capital of Squeeze on 01 January 2018 when

the retained earnings of Squeeze stood at £4,000.

The statements of financial position of Pop and Squeeze as at 31 December 2018

were as follows:-

Pop Squeeze

£'000 £'000 £'000 £'000

Non-current assets:

Property, plant and equipment 200 40

Investment in Squeeze 54

254 40

Current assets:

Inventory 120 22

Receivables 95 16

Bank 15 6

230 44

484 84

Equity:

Share capital 120 30

Retained earnings 180 19

300 49

Non-current liabilities: 100 23

Current liabilities: 84 12

484 84

i. The fair value of the non-current assets of Squeeze on 01January 2018 was

considered to be £50,000 as compared with their book value of £40,000. The

revaluation has not been reflected in the books of Squeeze (ignore any

depreciation implications).

ii. At the consolidation date, Pop had a trade receivables balance owing from

Squeeze of £4,000 and Squeeze has a trade payable balance (within current

liabilities) of the same value owing to Pop. All intercompany sales had been

sold onwards leaving no unrealized profit within inventory.

iii. The fair value of the non-controlling interest at acquisition was £6,000.

iv. Pop uses the fair value method to value the non-controlling interest and the

non-controlling interest accept their share of impairment.

v. Goodwill has suffered an impairment of £5,000.

Required a)

a) Prepare a consolidated statement of financial position for the

company as at 31 December 2018.

Answer rating: 100% (QA)

In order to prepare the consolidated statement of financial position we need to consider several key points from your question 1 On 01 January 2018 Pop acquired 80 of Squeeze at a time when Squeezes r... View the full answer