On 1 June 2010, Premier acquired 80% of the equity share capital of Sanford. The consideration...

     

Transcribed Image Text:

On 1 June 2010, Premier acquired 80% of the equity share capital of Sanford. The consideration consisted of two elements: a share exchange of three shares in Premier for every five acquired shares in Sanford and $800,000 cash. The share issue has not yet been recorded by Premier. At the date of acquisition shares in Premier had a market value of $5 each. Below are the summarized draft financial statements of both companies. Statements of profit or loss and other comprehensive income For the year ended 30 September 2010 Sanford $'000 45,000 (36,000 ) 9,000 (5,100 ) 3,900 Premier $'000 92,500 (70,500 22,000 (12,000 ) 10,000 Revenue Cost of sales Gross profit Other expenses Profit for the year Other comprehensive income: Gain on revaluation of land nil nil Total comprehensive income 10,000 3,900 Statements of financial position as at 30 September 2010 Assets Non-current assets Property, plant and equipment Investments 25,500 1,800 27,300 12,500 39,800 13,900 nil 13,900 2,400 16,300 Current assets Total assets Equity and liabilities Equity Equity shares of $1 each Other equity reserve - 30 September 2009 (note (iv)) Retained earnings 12,000 500 12,300 24,800 15,000 39,800 5,000 nil 4,500 9,500 6,800 16,300 Current liabilities shifade Total equity and liabilities The following information is relevant: (i) At the date of acquisition, the fair values of Sanford's assets were equal to their carrying amounts with the exception of its property. This had a fair value of $1-2 million below its carrying amount, and had a remaining useful life of 8 years at the date of acquisition. Sanford has not incorporated this in its financial statements. (ii) Sales from Sanford to Premier throughout the year ended 30 September 2010 had consistently been $1 million per month. Sanford made a mark-up on cost of 25% on these sales. Premier had $2 million (at cost to Premier) of inventory that had been supplied in the post-acquisition period by Sanford as at 30 September 2010. Premier had a trade payable balance owing to Sanford of $350,000 as at 30 September (ii) 2010. This did not agree with the corresponding receivable in Sanford's books due to a $130,000 payment made to Sanford, which Sanford has not yet recorded. (iv) Premier's investments include investment in shares which at the date of acquisition were classified as fair value through other comprehensive income. The investments have increased in value by $300,000 during the year. The other equity reserve relates to these investments and is based on their value as at 30 September 2009. There were no acquisitions or disposals of any of these investments during the year ended 30 September 2010. (v) Premier's policy is to value the non-controlling interest at fair value at the date of acquisition deemed to be $3.5 million. (vi) There has been no impairment of consolidated goodwill. Required: (a) Prepare the consolidated statement of profit or loss and other comprehensive income for Premier for the year ended 30 September 2010. Prepare the consolidated statement of financial position for Premier as at 30 September 2010. (a) On 1 June 2010, Premier acquired 80% of the equity share capital of Sanford. The consideration consisted of two elements: a share exchange of three shares in Premier for every five acquired shares in Sanford and $800,000 cash. The share issue has not yet been recorded by Premier. At the date of acquisition shares in Premier had a market value of $5 each. Below are the summarized draft financial statements of both companies. Statements of profit or loss and other comprehensive income For the year ended 30 September 2010 Sanford $'000 45,000 (36,000 ) 9,000 (5,100 ) 3,900 Premier $'000 92,500 (70,500 22,000 (12,000 ) 10,000 Revenue Cost of sales Gross profit Other expenses Profit for the year Other comprehensive income: Gain on revaluation of land nil nil Total comprehensive income 10,000 3,900 Statements of financial position as at 30 September 2010 Assets Non-current assets Property, plant and equipment Investments 25,500 1,800 27,300 12,500 39,800 13,900 nil 13,900 2,400 16,300 Current assets Total assets Equity and liabilities Equity Equity shares of $1 each Other equity reserve - 30 September 2009 (note (iv)) Retained earnings 12,000 500 12,300 24,800 15,000 39,800 5,000 nil 4,500 9,500 6,800 16,300 Current liabilities shifade Total equity and liabilities The following information is relevant: (i) At the date of acquisition, the fair values of Sanford's assets were equal to their carrying amounts with the exception of its property. This had a fair value of $1-2 million below its carrying amount, and had a remaining useful life of 8 years at the date of acquisition. Sanford has not incorporated this in its financial statements. (ii) Sales from Sanford to Premier throughout the year ended 30 September 2010 had consistently been $1 million per month. Sanford made a mark-up on cost of 25% on these sales. Premier had $2 million (at cost to Premier) of inventory that had been supplied in the post-acquisition period by Sanford as at 30 September 2010. Premier had a trade payable balance owing to Sanford of $350,000 as at 30 September (ii) 2010. This did not agree with the corresponding receivable in Sanford's books due to a $130,000 payment made to Sanford, which Sanford has not yet recorded. (iv) Premier's investments include investment in shares which at the date of acquisition were classified as fair value through other comprehensive income. The investments have increased in value by $300,000 during the year. The other equity reserve relates to these investments and is based on their value as at 30 September 2009. There were no acquisitions or disposals of any of these investments during the year ended 30 September 2010. (v) Premier's policy is to value the non-controlling interest at fair value at the date of acquisition deemed to be $3.5 million. (vi) There has been no impairment of consolidated goodwill. Required: (a) Prepare the consolidated statement of profit or loss and other comprehensive income for Premier for the year ended 30 September 2010. Prepare the consolidated statement of financial position for Premier as at 30 September 2010. (a)

Answer rating: 100% (QA)

Premier Group Consolidated SPL OCI For the year ended 30 September 2010 Premier Sanford x 412 Adj ... View the full answer