P Ltd acquired 75% of S Ltd on 1.10.2019 giving 2 new shares (market value $2) in
Question:
P Ltd acquired 75% of S Ltd on 1.10.2019 giving 2 new shares (market value $2) in P Ltd for every 5 acquired shares in S ltd. Additionally, P Ltd issued to shareholders of S Ltd a $100 10% loan note for every 1000 shares acquired in S Ltd.
The purchase consideration was not recorded in P Ltd accounts.
Statement of financial position as at 31.03.2020
P Ltd S Ltd
$000 $000
Assets
Non-current assets
Property, plant & equipment 48000 25000
Equity investments (note 1) 7500 3500
55500 28500
Current assets
Inventory (note 2) 17500 8500
Trade receivables (note 3) 15000 10000
Bank 5000 0
37500 18500
Total assets 93000 47000
Equity and liabilities
Equity
Equity shares $1 39000 21000
Retained earnings-1.4.2019 20000 (5000)
Retained earnings for Y/E 31.3.2020 8000 7000
67000 23000
Non-current liabilities
10% loan notes 10000 0
Current liabilities
Trade payables (note 3) 16000 14000
Bank overdraft 0 10000
16000 24000
Total equity and liabilities 93000 47000
Notes
- According to a draft statement of profit and loss prepared at the acquisition date, S Ltd made a net loss of $2 million for the year and P Ltd accepted it as the basis for calculating the pre-acquisition and the post-acquisition share of the profit of S Ltd for the year ended 31.03.2020.
At the acquisition date, P Ltd made a fair value evaluation of S Ltd net assets and found that a plant, with a remaining useful life of 3 years, had a fair value $3 million below its carrying amount.
P Ltd value NCI at fair value at the acquisition date and S Ltd share price of $1.25 is considered to be fair value.
- P Ltd made sales to S Ltd $4.5 million per month since acquisition with a 20% mark upon cost. S Ltd had one month’s supply of these goods in stock at 31.03.2020. P Ltd's normal mark-up on cost is 30%.
- S Ltd's current balance with P Ltd at 31.03.2020 was $3 million and did not agree with P Ltd's equivalent receivable due to a payment of $1 million made by S Ltd 0n 28.03.2020 which was received by P Ltd on 3.4.2020.
- The equity investments of P Ltd and S Ltd are carried at their fair values as of 1.4.2019. As of 31.3.2020, these had fair values of $7 million and $4 million respectively.
- There were no impairment losses during the year.
Required
Prepare the consolidated statement of financial position for P Ltd as of 31.3.2020.
Expert Answer:
Prepare the consolidated statement of financial position for P Ltd as of 3132020 P Ltd and Subsidiar... View the full answer
