On January 1, 2015 Paramount Ltd acquired 70% of Sanchez Ltd. On that date Sanchez Ltd had retained earnings of $2,100,000 and revaluation reserves of $1,200,000. On December 31, 2019 the statements of financial position of the two companies were as follows:

 

Notes:

i.              Goodwill has been impaired by twenty percent (20%).

ii.             Paramount Ltd holds a number of shares in other companies amounting to $400,000.

iii.            The market value of one Sanchez Ltd share on December 31, 2019 was $7.50.

iv.           The fair value method is used by Paramount Ltd group to measure the non-controlling interest (NCI).

v.            Sanchez Ltd has not issued any shares since its acquisition.

Required:

a.            Calculate the net assets of Sanchez Ltd.

b.            Determine the value of Goodwill as a result of the acquisition.

c.             Find the value of the non-controlling interests as a result of the acquisition. 

d.            What is the value of the group’s retained earnings on December 31, 2019?

e.            Calculate the group’s revaluation reserve. 

f.             Prepare a consolidated statement of financial position as at December 31, 2019 in accordance with IFRS10. 

Transcribed Image Text:

Details Non-current assets Investments Current assets Total assets Share capital ($5 ordinary shares) Share premium Retained earnings Revaluation reserves Non-current liabilities Current liabilities Total equity and liabilities Paramount Ltd $ 20,000,000 5,000,000 7,000,000 32,000,000 4,000,000 6,500,000 12,000,000 4,500,000 3,500,000 1,500,000 32,000,000 Sanchez Ltd $ 6,000,000 1,000,000 2,000,000 9,000,000 1,500,000 0 3,800,000 2,000,000 900,000 800,000 9,000,000 Details Non-current assets Investments Current assets Total assets Share capital ($5 ordinary shares) Share premium Retained earnings Revaluation reserves Non-current liabilities Current liabilities Total equity and liabilities Paramount Ltd $ 20,000,000 5,000,000 7,000,000 32,000,000 4,000,000 6,500,000 12,000,000 4,500,000 3,500,000 1,500,000 32,000,000 Sanchez Ltd $ 6,000,000 1,000,000 2,000,000 9,000,000 1,500,000 0 3,800,000 2,000,000 900,000 800,000 9,000,000

Answer rating: 100% (QA)

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