QUESTION I [38 marks] The following are the statements of financial position of Adam Limited and...

  

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QUESTION I [38 marks] The following are the statements of financial position of Adam Limited and Eve Limited, as at the 31 December 2020. Adam Limited acquired the shares in Eve Limited on January 1, 2018 when the reserve balances were, general reserves: $3,000 and retained earnings $12 000. Adam Limited acquired 225,000 shares in Eve Limited by means of a share exchange and an immediate cash payment of $180,000. The shareholders of Eve Limited were given 3 shares in Adam Limited for every 5 shares held in Eve Limited. The market price of a share in Adam Limited at this date was $5.10 and the market price of a share in Eve Limited was $3.40. Only the immediate cash payment has been recorded in the books. Non-Current Assets Land Furniture and Fittings at net book value Machinery at net book value Statements of Financial Position as at 31 December 2020 Adam Limited Eve Limited S S Investments Subsidiary: Eve Limited Other investments Current Assets Inventory Trade Accounts receivable Prepayments Bank & cash EQUITY & LIABILITES $1 Ordinary shares Reserves General reserves Retained earnings Non-Current Liabilities i 9% Debentures Current Liabilities Trade Payables Taxation 765,000 246,000 134.000 210,000 130, 000 9,000 290,000 145 000 94 000 S 1,145,000 180,000 639,000 1.964,000 800,000 70,000 115,000 740 000 239.000 1.964 000 305,000 123,000 90.000 40,000 74,000 80 000 12,000 25.000 164,000 28,000 S $18,000 231,000 749,000 300,000 27 000 40 000 190,000 192,000 749,000 ADDITIONAL INFORMATION 1. At the date of the acquisition the fair market value of land owned by Lucea Limited was $340,000, no adjustments were made. 2. At December 31 2020 goodwill was impaired by $40,000. 3. The current account of Eve Limited in the books of Adam Limited had a debit balance of $50,000, whereas the corresponding current account in the books of Eve Limited had a credit balance of $40,000. The difference represents a cash payment made by Lucea Limited not yet received by Adam Limited. 4. During the year Adam Limited sold goods to Eve Limited for $126,000, after charging a mark-up of 50%. At 31 December 2020 only 80% of the goods were sold. 5. During the year Eve Limited transferred machinery to Adam Limited at a price of $240,000 (cost to Eve Limited $210,000). Adam Limited depreciated the machinery at 20% of the cost to them. 6. Non-Controlling Interest should be valued at the market price per share in Eve Limited at acquisition date. 7. Other investments owned by Eve Limited had a fair market value of $50,000 at the 31 December 2020. Prepare the Consolidated Statement of Financial Position for the Adam Limited Group as at 31 December 2020. (38 marks) QUESTION I [38 marks] The following are the statements of financial position of Adam Limited and Eve Limited, as at the 31 December 2020. Adam Limited acquired the shares in Eve Limited on January 1, 2018 when the reserve balances were, general reserves: $3,000 and retained earnings $12 000. Adam Limited acquired 225,000 shares in Eve Limited by means of a share exchange and an immediate cash payment of $180,000. The shareholders of Eve Limited were given 3 shares in Adam Limited for every 5 shares held in Eve Limited. The market price of a share in Adam Limited at this date was $5.10 and the market price of a share in Eve Limited was $3.40. Only the immediate cash payment has been recorded in the books. Non-Current Assets Land Furniture and Fittings at net book value Machinery at net book value Statements of Financial Position as at 31 December 2020 Adam Limited Eve Limited S S Investments Subsidiary: Eve Limited Other investments Current Assets Inventory Trade Accounts receivable Prepayments Bank & cash EQUITY & LIABILITES $1 Ordinary shares Reserves General reserves Retained earnings Non-Current Liabilities i 9% Debentures Current Liabilities Trade Payables Taxation 765,000 246,000 134.000 210,000 130, 000 9,000 290,000 145 000 94 000 S 1,145,000 180,000 639,000 1.964,000 800,000 70,000 115,000 740 000 239.000 1.964 000 305,000 123,000 90.000 40,000 74,000 80 000 12,000 25.000 164,000 28,000 S $18,000 231,000 749,000 300,000 27 000 40 000 190,000 192,000 749,000 ADDITIONAL INFORMATION 1. At the date of the acquisition the fair market value of land owned by Lucea Limited was $340,000, no adjustments were made. 2. At December 31 2020 goodwill was impaired by $40,000. 3. The current account of Eve Limited in the books of Adam Limited had a debit balance of $50,000, whereas the corresponding current account in the books of Eve Limited had a credit balance of $40,000. The difference represents a cash payment made by Lucea Limited not yet received by Adam Limited. 4. During the year Adam Limited sold goods to Eve Limited for $126,000, after charging a mark-up of 50%. At 31 December 2020 only 80% of the goods were sold. 5. During the year Eve Limited transferred machinery to Adam Limited at a price of $240,000 (cost to Eve Limited $210,000). Adam Limited depreciated the machinery at 20% of the cost to them. 6. Non-Controlling Interest should be valued at the market price per share in Eve Limited at acquisition date. 7. Other investments owned by Eve Limited had a fair market value of $50,000 at the 31 December 2020. Prepare the Consolidated Statement of Financial Position for the Adam Limited Group as at 31 December 2020. (38 marks)

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