PFR 6-1

180. On 1 June 20X1 Olae Co acquired 60% of the equity share capital of Stanley Co. At the date of acquisition the fair values of Stanley Co’s net assets were equal to their carrying amounts with the exception of its property. This had a fair value of $1.2 million BELOW its carrying amount. The property had a remaining useful life of eight years.

What effect will any adjustment required in respect of the property have on group retained earnings at 30 September 20X1?

181. Craddy Co acquired 80% of Bella Co’s 115,000 $1 ordinary shares for $800,000 when the retained earnings of Bella Co were $480,000

Bella Co also has an internally developed customer list which has been independently valued at $90,000. The non-controlling interest in Bella Co was judged to have a fair value of $360,000 at the date of acquisition.

What was the goodwill arising on acquisition?

182. On 1 August 20X7 Pastol Co purchased 18 million of the 24 million $1 equity shares of Sardonic Co. The acquisition was through a share exchange of two shares in Pastol Co for every three shares in Sardonic Co. The market price of a share in Pastol Co at 1 August 20X7 was $4.85. Pastol Co will also pay in cash on 31 July 20X9 (two years after acquisition) $1.98 per acquired share of Sardonic Co. Pastol Co’s cost of capital is 10% per annum.

What is the amount of the consideration attributable to Pastol Co for the acquisition of Sardonic Co?

183. On 1 July 20X5, Prill Co acquired 80% of the equity of Saturn Co. At the date of acquisition, goodwill was calculated as $12,500 and the non-controlling interest was measured at fair value. In conducting the fair value exercise on Saturn Co’s net assets at acquisition, Prill Co concluded that property, plant and equipment with a remaining life of ten years had a fair value of $450,000 in excess of its carrying amount. Saturn Co had not incorporated this fair value adjustment into its individual financial statements.

At the reporting date of 31 December 20X5, the goodwill was fully impaired. For the year ended 31 December 20X5, Saturn Co reported a profit for the year of $400,000.

What is the Prill Group profit for the year ended 31 December 20X5 that is attributable to non-controlling interests?

184. Travor Co, a parent company, acquired landley Co, an unincorporated entity, for $2.8 million. A fair value exercise performed on landley Co’s net assets at the date of purchase showed:

How should the purchase of landley be reflected in Travor Co’s consolidated statement of financial position?

185. On 31 August, 2014 when Flue PLC acquired 70% of the $2,000,000 50c equity shares of Preya PLC, the retained earnings of Flue PLC and Preys PLC were $540,000 and $640,000 respectively and the market value of the Preys PLC shares was $2,60

The carrying amount of the Preys PLC net assets were equal to their fair values with the exception of a building that had a fair value $2,400,000 in greater than its carrying value. At the date of acquisition of building had an estimated remaining useful life of 8 years.

The terms of acquisition were that Flue PLC would issue 1 new share in Flue PLC for every 4 shares acquired in Preys PLC and would pay $1.20 immediately for each share acquired plus a further $1.20 on 1 September, 2016 for every 10 shares acquired.

The Flue PLC shares had a market value as at date of acquisition of $2.80. Flue PLC has decided to measure the NCI at fair value with the Preys PLC share price being a reasonable indication of fair value.

At 31 December, 2014 the retained earnings of Flue PLC and preys PLC were $690,000 and $720,000 respectively. Flue PLC’s Cost of Capital is 7% and goodwill is not impaired.

At what amount should the NCI be shown in the consolidated statement of financial position for the Flue PLC group as at 31 December, 2014? (Answer to the nearest $000)

186. Which of the following definitions is not included within the definition of control per IFRS 10 Consolidated Financial Statements?

187. On 1 July 20X7, Spider Co acquired 60% of the equity share capital of Fly Co and on that date made a $10 million loan to Fly Co at a rate of 8% per annum.

What will be the effect on group retained earnings at the year-end date of 31 December 20X7 when this intragroup transaction is cancelled?

188. Following the acquisition of Praise PLC by Flew PLC the two entities traded with each other. At the end of the financial year, each entity had in inventory goods acquired from the other. In Praise PLC there was $15,000 acquired from Flew PLC and in Flew PLC there was $15,000 acquired from Praise PLC.

When Flew PLC sells goods to Praise PLC it does so to realize a margin of 10% and when Praise PLC sells goods to Flew PLC, these are recorded to recognize a mark-up of 25%.

Following any necessary adjustment on consolidation, by how much will the combined cost of sales figure have been amended for the unrealized profits?

189. Following the acquisition of Blessed PLC by Read PLC the two entities traded with each other. At the end of the financial year, each entity had in inventory goods acquired from the other. In Blessed PLC there was $20,000 acquired from Read PLC and in Read PLC there was $20,000 acquired from Praise PLC.

When Blessed PLC sells goods to Read PLC it does so to realize a margin of 20% and when Read PLC sells goods to Blessed PLC, these are recorded to recognize a mark-up of 25%.

Following any necessary adjustment on consolidation, by how much will the combined cost of sales figure have been amended for the unrealized profits?

190. Petergrew acquires 80% of the share capital of Paula on 1 August 20X6 and is preparing its group financial statements for the year ended 31 December 20X6.

How will Paula’s results be included in the group statement of profit or loss?

191. VLU has an 80% subsidiary ADK, which has been a subsidiary of VLU for the whole of the current year ADK reported a profit after tax of $600,000 in its own financial statements. You ascertain that at the year‐end there was unrealised profit of $60,000 on sales by ADK to VLU.

What is the non‐controlling interest in ADK that would be reported in the consolidated statement of profit or loss and other comprehensive income of VLU for the year?

192. Premier Co acquired 80% of Sanford Co on 1 June 20X1. Sales from Sanford Co to Premier Co throughout the year ended 30 September 20X1 were consistently $1 million per month. Sanford Co made a mark-up on cost of 25% on these sales. At 30 September 20X1 Premier Co was holding $2 million inventory that had been supplied by Sanford Co in the post-acquisition period.

By how much will the unrealised profit decrease the profit attributable to the non-controlling interest for the year ended 30 September 20X1?

193. On 1 January 20X3 Westbridge Co acquired all of Brookfield Co’s 100,000 $1 shares for $300,000. The goodwill acquired in the business combination was $40,000, of which 50% had been written off as impaired by 31 December 20X5. On 31 December 20X5 Westbridge Co sold all of Brookfield’s shares for $450,000 when Brookfield had retained earnings of $185,000.

What is the profit on disposal that should be included in the INDIVIDUAL ENTITY financial statements of Westbridge Co?

194. Harry acquired an 80% holding in Style on 1 April 20X6. From 1 April 20X6 to 31 December 20X6 Style sold goods to Harry for $4.3m at a mark‐up of 10% Harry’s inventory at 31 December 20X6 included $2.2m of such inventory. The statements of profit or loss for each entity for the year to 31 December 20X6 showed the following in respect of cost of sales:

Harry  $14.7m

Style   $11.6m

What is the cost of sales figure to be shown in the consolidated statement of profit or loss for the year to 31 December 20X6?

195. A acquired a 60% holding in B on 1 July 20X6. At this date, A gave B a $500,000 8% loan. The interest on the loan has been accounted for correctly in the individual financial statements. The totals for finance costs for the year to 31 December 20X6 in the individual financial statements are shown below.

A   $200,000

B   $70,000

What are consolidated finance costs for the year to 31 December 20X6?

196. An associate is an entity in which an investor has significant influence over the investee

Which TWO of the following indicate the presence of significant influence?

1 The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor.

2 The investor owns 660,000 of the 3,000,000 equity voting shares of the investee.

3 The investor controls the votes of a majority of the board members.

4 The investor has representation on the board of directors of the investee.

197. Filiatra PLC’s only investment is a 40% holding of the equity shares of Kyparissia PLC acquired on 1 May, 2015. The acquisition had cost $850,000 comprised of an issue of 300,000 shares in Filiatra PLC that were worth $1.70 each on the date of acquisition plus a further $340,000 immediate cash payment. At the date of acquisition the retained earnings in Kyparissia PLC were $475,000 and at the year end this had risen to $500,000.

In the year to 31 December, 2015 Kyparissia PLC achieved a profit before tax of $45,000 and after tax a profit of $30,000.

At what value will the investment in Kyparissia PLC be shown In the consolidated statement of financial position for Filiatra PLC as at 31 December, 2015? Answer to the nearest $000

198. Sapphire Co owns 30% of Emerald Co and exercises significant influence over it. Emerald Co sold goods to Sapphire Co for $160,000. Emerald Co applies a one-third mark-up on cost. Sapphire Co still had 25% of these goods in inventory at the year end.

What amount should be deducted from consolidated retained earnings in respect of this transaction?

199. How should an associate be accounted for in the consolidated statement of profit or loss?

200. Jarvis Co owns 30% of McLintock Co. During the year to 31 December 20X4 McLintock Co sold $2 million of goods to Jarvis Co, of which 40% were still held in inventory by Jarvis at the year end. McLintock Co applies a mark-up of 25% on all goods sold.

What effect would the above transactions have on group inventory at 31 December 20X4?

201. How does IAS 1 define the ‘operating cycle’ of an entity?

202. Where are equity dividends paid presented in the financial statements?

203. Which of the following would not NECESSARILY lead to a liability being classified as a current liability?

204. At 1 October 20X4, BK had accrued interest payable of $12,000.

During the year ended 30 September 20X5, BK charged finance costs of $41,000 to its statement of profit or loss, including unwinding a discount relating to a provision stated at its present value of $150,000 at 1 October 20X4. The closing balance on accrued interest payable account at 30 September 20X5 was $15,000, and BK has a discount rate of 6%

How much interest paid should BK show on its statement of cash flows for the year ended 30 September 20X5?

205. Which item would be NOT be shown in a statement of cash flows using the indirect method?

206. The carrying amount of property, plant and equipment was $410 million at 31 March 20X1 and $680 million at 31 March 20X2. During the year, property with a carrying amount of $210 million was revalued to $290 million. The depreciation charge for the year was $115 million. There were no disposals.

What amount will appear on the statement of cash flows for the year ended 31 March 20X2 in respect of purchases of property, plant and equipment?

207. The statement of financial position of Pinto Co at 31 March 20X7 showed property, plant and equipment with a carrying amount of $1,860,000.

At 31 March 20X8 it had increased to $2,880,000. During the year to 31 March 20X8 plant with a carrying amount of $240,000 was sold at a loss of $90,000, depreciation of $280,000 was charged and $100,000 was added to the revaluation surplus in respect of property, plant and equipment.

What amount should appear under ‘investing activities’ in the statement of cash flows of Pinto Co for the year ended 31 March 20X8 as cash paid to acquire property, plant and equipment?

208. IAS 7 Statement of Cash Flows sets out the three main headings to be used in a statement of cash flows.

Which TWO of the items below would be included under the heading ‘Cash flows from operating activities’ according to IAS 7?

209. During the year to 31 July 20X7 Smartypants made a profit of $37,500 after accounting for depreciation of $2,500.

During the year non‐current assets were purchased for $16,000, receivables increased by $2,000, inventories decreased by $3,600 and trade payables increased by $700.

What was the increase in cash and bank balances during the year?