P Group is formed by P Ltd, S1 Ltd, and 52 Ltd. The current separate financial...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
P Group is formed by P Ltd, S1 Ltd, and 52 Ltd. The current separate financial statements of P Ltd, 51 Ltd, and 52 Ltd are shown below. All figures are in $ unless otherwise indicated. Abridged Income Statement and Statement of Changes in Equity for the year ended 31 December 20x2 Profit before tax Tax Profit after tax Dividends declared Profit retained Retained earnings, 1 January 20x2 Retained earnings, 31 December 20x2 Statement of Financial Position as at 31 December 20x2 Fixed assets, net book value Investment in S1 Ltd Investment in 52 Ltd Inventory Other net assets Cash Total Assets Current and long-term liabilities Share capital Retained earnings Equity and Liabilities P Ltd 51 Ltd 1,230,000 780,000 (246,000) (156,000) 984,000 624,000 (150,000) (70,000) 834,000 554,000 3,216,000 1,400,000 4,050,000 1,954,000 P Ltd 1,875,000 1,900,000 $1 Ltd 993,000 560,000 225,000 1,232,000 52 Ltd 520,000 (104,000) 416,000 (80,000) 336,000 620,000 956,000 52 Ltd 400,000 320,000 289,000 1,990,000 755,000 125,000 50,000 66,000 6,210,000 3,060,000 1,510,000 960,000 306,000 304,000 1,200,000 800,000 250,000 4,050,000 1,954,000 956,000 6,210,000 3,060,000 1,510,000 Information regarding the acquisition of S1 Ltd and 52 Ltd are as follows: 51 Ltd 1 Jan 20x1 90% Date of acquisition by immediate parent Percentage acquired by P Ltd Percentage acquired by $1 Ltd Shareholders' equity at date of acquisition by immediate parent Share capital Retained earnings 800,000 1,015,000 1,815,000 52 Ltd 1 Jan 20x0 200,000 60% 250,000 500,000 750,000 Retained earnings of S2 Ltd at 1 January 20x1 550,000 Fair value of NCI at 1 January 20x1 450,000 Fair value of NCI at 1 January 20x0 350,000 The fair value of identifiable net assets of S1 Ltd and 52 Ltd were close to book value at both date of acquisition, except for a fixed asset of 52 Ltd. The book value and fair value of the fixed asset were $600,000 and $700,000, respectively, as at 1 January 20x0, and were $500,000 and $800,000, respectively, as at 1 January 20x1. The estimated useful life of the fixed asset was 5 years at 1 January 20x1 with no residual value. Additional information: 1. P Ltd recognizes non-controlling interests (NCI) at full fair value. Fair value of NCI of S1 Ltd includes both direct NCI of S1 Ltd and indirect NCI share of S2 Ltd. Fair value of NCI of S2 Ltd is direct NCI of S2 Ltd. 2. Assets and liabilities whose classification are not shown in the Statement of Financial Position should be included in "Other net assets". 3. Assume a tax rate of 20% and that dividends income are tax-exempt. Required: 1. Analyze the group structure of the companies involved at the year ended 20x2, comment on whether P Ltd has "control" or "significant influence" over S1 Ltd and S2 Ltd, and discuss the non-controlling interests (NCI) involved. (25 marks) 2. Describe the available approaches to consolidate the subsidiaries of P Ltd and how they can be applied for the current situation. Comment on the differences between the approaches and the conditions that they are applicable. (25 marks) 3. Prepare the consolidation entries for the year ended 31 December 20x2. (20 marks) 4. Prepare the consolidated statement of profit or loss for the year ended 31 December 20x2 and the consolidated statement of financial position as at 31 December 20x2 for P Group. (30 marks) P Group is formed by P Ltd, S1 Ltd, and 52 Ltd. The current separate financial statements of P Ltd, 51 Ltd, and 52 Ltd are shown below. All figures are in $ unless otherwise indicated. Abridged Income Statement and Statement of Changes in Equity for the year ended 31 December 20x2 Profit before tax Tax Profit after tax Dividends declared Profit retained Retained earnings, 1 January 20x2 Retained earnings, 31 December 20x2 Statement of Financial Position as at 31 December 20x2 Fixed assets, net book value Investment in S1 Ltd Investment in 52 Ltd Inventory Other net assets Cash Total Assets Current and long-term liabilities Share capital Retained earnings Equity and Liabilities P Ltd 51 Ltd 1,230,000 780,000 (246,000) (156,000) 984,000 624,000 (150,000) (70,000) 834,000 554,000 3,216,000 1,400,000 4,050,000 1,954,000 P Ltd 1,875,000 1,900,000 $1 Ltd 993,000 560,000 225,000 1,232,000 52 Ltd 520,000 (104,000) 416,000 (80,000) 336,000 620,000 956,000 52 Ltd 400,000 320,000 289,000 1,990,000 755,000 125,000 50,000 66,000 6,210,000 3,060,000 1,510,000 960,000 306,000 304,000 1,200,000 800,000 250,000 4,050,000 1,954,000 956,000 6,210,000 3,060,000 1,510,000 Information regarding the acquisition of S1 Ltd and 52 Ltd are as follows: 51 Ltd 1 Jan 20x1 90% Date of acquisition by immediate parent Percentage acquired by P Ltd Percentage acquired by $1 Ltd Shareholders' equity at date of acquisition by immediate parent Share capital Retained earnings 800,000 1,015,000 1,815,000 52 Ltd 1 Jan 20x0 200,000 60% 250,000 500,000 750,000 Retained earnings of S2 Ltd at 1 January 20x1 550,000 Fair value of NCI at 1 January 20x1 450,000 Fair value of NCI at 1 January 20x0 350,000 The fair value of identifiable net assets of S1 Ltd and 52 Ltd were close to book value at both date of acquisition, except for a fixed asset of 52 Ltd. The book value and fair value of the fixed asset were $600,000 and $700,000, respectively, as at 1 January 20x0, and were $500,000 and $800,000, respectively, as at 1 January 20x1. The estimated useful life of the fixed asset was 5 years at 1 January 20x1 with no residual value. Additional information: 1. P Ltd recognizes non-controlling interests (NCI) at full fair value. Fair value of NCI of S1 Ltd includes both direct NCI of S1 Ltd and indirect NCI share of S2 Ltd. Fair value of NCI of S2 Ltd is direct NCI of S2 Ltd. 2. Assets and liabilities whose classification are not shown in the Statement of Financial Position should be included in "Other net assets". 3. Assume a tax rate of 20% and that dividends income are tax-exempt. Required: 1. Analyze the group structure of the companies involved at the year ended 20x2, comment on whether P Ltd has "control" or "significant influence" over S1 Ltd and S2 Ltd, and discuss the non-controlling interests (NCI) involved. (25 marks) 2. Describe the available approaches to consolidate the subsidiaries of P Ltd and how they can be applied for the current situation. Comment on the differences between the approaches and the conditions that they are applicable. (25 marks) 3. Prepare the consolidation entries for the year ended 31 December 20x2. (20 marks) 4. Prepare the consolidated statement of profit or loss for the year ended 31 December 20x2 and the consolidated statement of financial position as at 31 December 20x2 for P Group. (30 marks)
Expert Answer:
Answer rating: 100% (QA)
1 P Ltd has control over both 1 Ltd and 2 Ltd because it has a majority shareholding in both companies P Ltd also has the power to appoint and remove the majority of the board of directors of both com... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these finance questions
-
The following information is available for the year ended 31 March 20X6 (values in $m): Present value of scheme liabilities at 1 April 20X5 $1,007; Fair value of plan assets at 1 April 20X5 $844;...
-
For the year ended 31 December 2019, Encik Remmy received annual salary of RM360,000. Besides, he received the following employment income and benefits from the company: Bonus equivalent to 1 month...
-
Separate financial statements of Panamer Corporation, a U.S. Multinational enterprise, and its branch for the year ended December 31, Year 6 are shown below. (IN is the symbol for the Iticar pesos)...
-
Bob Morin opened a medical practice specializing in surgery. During the first month of operation (August), the business, titled Bob Morin, Professional Corporation (P.C.), experienced the following...
-
What is the maximum amount by which the wavelength of an incident photon could change when it undergoes Compton scattering from a nitrogen molecule (N2)?
-
Refer to formulas (11.2.2) and (11.2.3). Assume Ï 2 i = Ï 2 k i where Ï 2 is a constant and where k i are known weights, not necessarily all equal. Using this assumption, show that the...
-
Match the term with its definition by placing the corresponding letter in the space provided: C Example: Amounts owed to a business by another business or individual 1. A contra-account, related to...
-
Match each term to the correct definition. Terms: a. Flexible budget b. Flexible budget variance c. Sales volume variance d. Static budget e. Variance Definitions: 1. A summarized budget for several...
-
How have information systems changed the way businesses operate and their products and services? labor efficiency is considered a major component of the learning curve concept.Furthermore labor...
-
Upsidedown Cake Company produces dessert products for sale in grocery stores, but it also has a retail location. At the end of 2018, the company had $349,000 in accounts receivable before netting out...
-
Answer this question after reading the below post: Which of these five management styles do you prefer when dealing with conflict and why? Recognizing that conflict and conflict resolution will be a...
-
What are the steps in international strategy formulation? Are these likely to vary among firms?
-
What are some of the fundamental issues that must be addressed in international advertising?
-
What are the four basic philosophies that guide strategic management in most MNCs?
-
Discuss the history of the EU. What are the major challenges the EU has had to overcome to reach its current preeminence?
-
What are the problems that a firm using market pricing might encounter?
-
A very long, rectangular cross-section block is made from metal with the following properties: thermal 8719K W g conductivity = 139 K, density = 2907k3, and specific heat capacity = 871 gk. Initially...
-
Global.asax is used for: a. declare application variables O b. all other answers are wrong O c. declare global variables O d. handle application events
-
Describe the differences between a Subchapter S corporation and a Subchapter C corporation.
-
What are the responsibilities of the executor of an estate?
-
Under Lennon Hospitals rate structure, it earned patient service revenue of $9 million for the year ended December 31, 2010. However, Lennon did not expect to collect this entire amount because it...
-
Is there or can there be an end to digital business transformation?
-
Could an accountant work at a more mature digital business like Google or Amazon without digital technology / digital transformation / digital business competencies?
-
How do digital technology advancements disrupt the work accountants do?
Study smarter with the SolutionInn App