At 1 October 2018 Cha Ltd had an investment in a subsidiary, Hei Ltd, as well...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
At 1 October 2018 Cha Ltd had an investment in a subsidiary, Hei Ltd, as well as a number of other insignificant investments. On 1 January 2019 Cha Ltd acquired 80% of the ordinary share capital of Sai Ltd. The draft summarised statements of financial position of Cha Ltd, Hei Ltd and Sai Ltd as at 30 September 2019 are shown below. Cha Ltd Hei Ltd Sai Ltd ASSETS Non-current assets Property, plant and equipment Investments 562,000 374,000 235,000 565,000 1,127,000 374,000 235,000 Current assets 35,300 29,400 Inventories 72,000 59,400 Trade and other 47,800 31,000 receivables Cash and cash 7,100 3,200 1,800 equivalents 126,900 1,253,900 93,600 467,600 66,500 Total assets 301,500 EQUITY AND LIABILITIES Equity Ordinary share capital (£l shares) Share premium account Retained eamings 600,000 300,000 200,000 200,000 280,900 1,080,900 89,700 45,600 389,700 245,600 Current liabilities Trade and other 93,000 40,900 31,900 payables Income tax 80,000 173,000 1,253,900 37,000 77,900 467,600 24,000 55,900 301,500 Total equity and liabilities Additional information: Hei Ltd 1 Oct 2015 Sai Ltd 1 Jan 2019 80% £250,000 £51,000 Fair value Date of acquisition Percentage holding acquired Consideration (note (2) Retained eamings at date of acquisition Goodwill and non-controlling interest method Cumulative goodwill impairment to 30 September 2018 Goodwill impairment for year ended 30 September 2019 (1) At the dates of acquisition the fair values of the assets, liabilities and contingent liabilities of Hei Ltd and Sai Ltd were equal to their carrying amounts, with one exception. 65% £295,000 £42,400 Proportionate £6,000 £3,000 Sai Ltd has an internally-generated brand which was not recognised in its own financial statements. However, an independent expert valued this brand at £40,000, with a useful life of five years, at 1 January 2019, the date of acquisition of Sai Ltd by Cha Ltd. (2) The consideration for the acquisition of Hei Ltd was made up of cash of £190,000 paid on 1 October 2015 and a further cash payment of £105,000, deferred until 1 October 2016. An appropriate discount factor is 5% pa. Cha Ltd accounted for the deferred consideration correctly. (3) The fair value of the non-controlling interest in Sai Ltd on 1 January 2019 was £64,000. (4) On 1 October 2018 Cha Ltd sold a machine to Hei Ltd for £63,000, On that date the machine had a remaining useful life of six years and a carrying amount of £48,000. Requirements 4.1 Prepare the consolidated statement of financial position of Cha Ltd as at 30 September 2019. (19 marks) 4.2 Set out the joumal entries that will be required on consolidation to recognise the goodwill relating to the acquisition of Sai Ltd in the consolidated statement of financial position of Cha Ltd as at 30 September 2019. (2 marks) 4.3 One month after the year end on 31 October 2019 Cha Ltd sold its 65% holding in Hei Ltd for £346,000. Hei Ltd made a profit for the month of October 2019 of £18,900. Calculate the profit or loss on disposal of Hei Ltd. (2 marks) Total: 23 marks At 1 October 2018 Cha Ltd had an investment in a subsidiary, Hei Ltd, as well as a number of other insignificant investments. On 1 January 2019 Cha Ltd acquired 80% of the ordinary share capital of Sai Ltd. The draft summarised statements of financial position of Cha Ltd, Hei Ltd and Sai Ltd as at 30 September 2019 are shown below. Cha Ltd Hei Ltd Sai Ltd ASSETS Non-current assets Property, plant and equipment Investments 562,000 374,000 235,000 565,000 1,127,000 374,000 235,000 Current assets 35,300 29,400 Inventories 72,000 59,400 Trade and other 47,800 31,000 receivables Cash and cash 7,100 3,200 1,800 equivalents 126,900 1,253,900 93,600 467,600 66,500 Total assets 301,500 EQUITY AND LIABILITIES Equity Ordinary share capital (£l shares) Share premium account Retained eamings 600,000 300,000 200,000 200,000 280,900 1,080,900 89,700 45,600 389,700 245,600 Current liabilities Trade and other 93,000 40,900 31,900 payables Income tax 80,000 173,000 1,253,900 37,000 77,900 467,600 24,000 55,900 301,500 Total equity and liabilities Additional information: Hei Ltd 1 Oct 2015 Sai Ltd 1 Jan 2019 80% £250,000 £51,000 Fair value Date of acquisition Percentage holding acquired Consideration (note (2) Retained eamings at date of acquisition Goodwill and non-controlling interest method Cumulative goodwill impairment to 30 September 2018 Goodwill impairment for year ended 30 September 2019 (1) At the dates of acquisition the fair values of the assets, liabilities and contingent liabilities of Hei Ltd and Sai Ltd were equal to their carrying amounts, with one exception. 65% £295,000 £42,400 Proportionate £6,000 £3,000 Sai Ltd has an internally-generated brand which was not recognised in its own financial statements. However, an independent expert valued this brand at £40,000, with a useful life of five years, at 1 January 2019, the date of acquisition of Sai Ltd by Cha Ltd. (2) The consideration for the acquisition of Hei Ltd was made up of cash of £190,000 paid on 1 October 2015 and a further cash payment of £105,000, deferred until 1 October 2016. An appropriate discount factor is 5% pa. Cha Ltd accounted for the deferred consideration correctly. (3) The fair value of the non-controlling interest in Sai Ltd on 1 January 2019 was £64,000. (4) On 1 October 2018 Cha Ltd sold a machine to Hei Ltd for £63,000, On that date the machine had a remaining useful life of six years and a carrying amount of £48,000. Requirements 4.1 Prepare the consolidated statement of financial position of Cha Ltd as at 30 September 2019. (19 marks) 4.2 Set out the joumal entries that will be required on consolidation to recognise the goodwill relating to the acquisition of Sai Ltd in the consolidated statement of financial position of Cha Ltd as at 30 September 2019. (2 marks) 4.3 One month after the year end on 31 October 2019 Cha Ltd sold its 65% holding in Hei Ltd for £346,000. Hei Ltd made a profit for the month of October 2019 of £18,900. Calculate the profit or loss on disposal of Hei Ltd. (2 marks) Total: 23 marks
Expert Answer:
Answer rating: 100% (QA)
ACQUISITION DIFFERENTIAL OF CHA LTD IN HEI LTD AND SAI LTD DATE OF ACQUISITION 01102015 01012019 SHARE OF ACQUISITION 65 80 NAME OF THE ACQUIREE HEI L... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
Students also viewed these accounting questions
-
A company is considering an investment in a machine that it believes will speed up production of a product. The machine will cost the company $2,000,000. Products produced using the machine will sell...
-
A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5...
-
A firm is considering an investment in a new machine with a price of $11.5 million to replace its existing machine. The current machine has a book value of $3 million, and a market value of $5.2...
-
paraphrase the following two passages using narrative in-text citations: 1.Those who teach ethics don't need to look far for lessons. Every day there's fresh scandal: Google is in hot water for how...
-
Suppose that X1, . . . , Xm form a random sample from the normal distribution with mean 1 and variance 21, and Y1, . . . , Yn form an independent random sample from the normal distribution with mean...
-
Solve Problem 8.19 assuming that the coefficients of friction at B are zero. PROBLEM 8.19 Wire is being drawn at a constant rate from a spool by applying a vertical force P to the wire as shown. The...
-
What factors could cause population growth to slow as population size increases?
-
Consider the following transactions for Jo Jo Music. 2011 Dec 6 Received a $7,000, 90-day, 12% note on account from Dark Star Music. 31 Made an adjusting entry to accrue interest on the Dark Star...
-
After reviewing the materials, discuss your views on ESG investing. Include in your discussion whether ESG investing should be incorporated into investment management decisions by either individual...
-
The business of "healthcare" is currently focused on: A. Establishing viable revenue through appropriate pricing strategies B. Mitigating financial risk C. Managing cost and increasing value D....
-
Stephens Security has two financing alternatives: (1). A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year...
-
When it comes to immigration laws, how should we balance the need to reform with border protection? Specifically, if you were POTUS, what changes to existing immigration laws would you recommend to...
-
2. As shown in the figure, 20 ft3 of air at T = 600 R, 100 lbf/in undergoes a polytropic expansion to a final pressure of 51.4 lbf/in. The process follows pV12 = constant. The work is W= 194.34 Btu....
-
Jamee owns a small hair salon. This is their income statement for the month of July. They had 235 customers this month. What is their full cost on their contribution margin for the month of July?...
-
The United States saw waves of immigration and several changes in immigration law from the mid-1860s to the late 20th century. Discuss the impact immigration, immigration laws, and the backlash to...
-
what strategies could you use to prevent the threats from being an issue in a study you are conducting? What approach will help overcome sampling bias and observer bias to equalize the chance you...
-
Write a program that reads in the x - and y - coordinates in Cartesian space for the endpoints of a line segment and then determines if the line segment is parallel to the y - axis. Hint: a line is...
-
On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $340,200. Stinson's book value on that date consisted of common stock of $100,000 and...
-
What are the deltas of a call option and a put option with the following characteristics? What does the delta of the option tell you? Stock price = $67 Exercise price = $70 Risk-free rate = 5% per...
-
You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $ 98 million in current taxes and...
-
The following is the sales budget for Shleifer, Inc., for the first quarter of 2013: Credit sales are collected as follows: 65 percent in the month of the sale. 20 percent in the month after the...
-
The following are summaries of the cash book and bank accounts of J. Duncan who does not keep his books using the double entry system. You are required to: (a) Calculate the value of J. Duncan's...
-
Read the following and answer the questions below. On 31 December 2015 the bank column of C. Tench's cash book showed a debit balance of 1,500. The monthly bank statement written up to 31 December...
-
The bank columns in the cash book for June 2016 and the bank statement for that month for D. Hogan are as follows: You are required to: () Write the cash book up to date to take the above into...
Study smarter with the SolutionInn App