Parent plc acquired 68% of Sub plcs share capital on 1 January 2009. The balance on Sub
Question:
Parent plc acquired 68% of Sub plc’s share capital on 1 January 2009. The balance on Sub plc’s retained earnings at that date was $2,500 and the share capital was $3,000 (1$ par value).
A- In arriving at the consideration for the shares in Sub, the book value of Sub’s property, plant, and equipment were found to be $500 above the fair value -5 years remaining life.
B- In 2009, Parent plc sold inventory to Subsidiary plc. The Sold inventory had a cost of $180 and the sale yielded a gross profit percentage of 20%. One fourth of these goods were sold by Subsidiary plc by 31 December 2010.
C- Goodwill was impaired by 80% during the year 2010. There was no impairment in 2009
D- On 1 January 2010, Parent plc sold a depreciable plant asset to Sub plc for $4,760. This asset was purchased by Parent on 1 January 2005 for $ 7,200 and was depreciated using the straight-line method over its 12 years useful life and zero residual value. After the sale, the plant asset is depreciated by Sub plc using the straight-line method over its remaining useful life.
E- The accounts receivable in Sub plc include a $77 due from Parent plc and the accounts payable in Parent plc include $ $60 due to Sub plc. The differences between the two balances relate to $17 being paid and recorded by the Parent in December 2010 but not received by the Subsidiary until after year-end in January 2011.
F- Goodwill is calculated using the full goodwill method.
The statements of financial position for the two companies were as follows as of 31 December 2010
| Parent $ | Sub $ |
Non-Current Assets |
|
|
Plant property and Equipment | 15,460 | 9,000 |
Investment in Sub plc at cost | 8,500 |
|
Current Assets |
|
|
Inventory | 1,800 | 770 |
Accounts Receivable | 1,000 | 650 |
Cash | 450 | - |
Total Assets | 27,210 | 10,420 |
Current Liabilities |
|
|
Accounts payable | 2,210 | 2,920 |
Equity |
|
|
Share Capital 1$ par | 10,000 | 3,000 |
Retained Earnings | 15,000 | 4,500 |
Total Liabilities and Equity | 27,210 | 10,420 |
The consolidated figure for the group’s accounts receivable on 31 December 2010 is?
Select one:
a. $1,450
b. $1,650
c. None of the above
d. $1,573
e. $1,300
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott