F3 Practice Questions Consolidation.
F3 Practice Questions Consolidation.
F3 Practice Questions Consolidation.
Background
Lucize and Mirog are limited liability companies. On 1 June 20X8 Luczie
purchased 60% of the equity shares in Mirog for $20m. On 1 June 20X8
the retained earnings of Mirog were $7m and the fair value of the non-
controlling interests in Mirog was $11m. The goodwill arising on the
acquisition was $9m.
The following are the summarized statements of financial position of
the two companies at 31 March 20X9.
Statements of financial position as at 31 March 20X9
Assets Luczie Mirog
Non – current assets: $m $m
Intangible assets 11 3
Tangible assets 49 20
Investments 20
80 23
Current assets:
Inventories 25 11
Trade receivables 33 15
Other current assets 12 4
70 30
During the year ended 31 March 20X9, Luczie sold inventory costing
$20m to Mirog for $24m. Mirog had resold all these items by 31 March
20X9 but still owes $9m to Luczie in respect of these purchases.
-Task 1 (11 marks)
Complete the consolidated statement of financial position for Luczie.
Luczie
Consolidated statements of financial position as at 31 March 20X9
Assets
Non- current assets $m
Intangible assets
Tangible assets
Current assets
Inventories
Trade receivables
Other current assets
Total assets
Task – 2
On 30 April 20x9 Luczie purchased 25% of the voting shares in Gremble.
One of Lucize's directors will sit on the board of Gremble.
What is the relationship between Luczie and Gremble?
a) Gremble is a subsidiary of Luczie
b) Gremble is a trade investment of Lucize
c) Gremble is an associate of Lucize
d) There is no relationship between Luczie and Gremble
Task- 3
The basic principle of equity accounting is that the investment in an
associate is initially recognized at …………………… and afterwards the
carrying amount is increased is include …………………….
Q2
Prite Co acquired 90% of Sero Co on 1 October 20X3 when Setro Co had
retained earnings of $395,000. Consideration paid by Prite Co was
mixture of cash and share as follows:
*$200,000 cash
* 100,000 ordinary 50c shares with a fair value of $3.50 per share
The fair value of the non- controlling interest at the date was $50,000.
The draft statements of financial position for Prite Co and Sero Co as at
30 September 20X4 are:
Prite Co Sero Co
$'000 $'000
Non- current assets
Property , Plant and Equipment (PPE) 1,400 400
Investment in Sero Co 200
Equity
Equity shares of 50 c each 500 120
Other components of equity (share premium) 760
Retained earnings 950 465
2,210 585
Non – current liabilities 300
Current liabilities 340 85
Total equity and liabilities 2,850 670
Task 2
Prepare the Prite group consolidated statements of financial position
30 September 20X4.
Prite group
$'000
Non-current assets
Goodwill
Current assets
Total assets
Equity
Share capital
Other components of equity (Share premium)
Group retained earnings
Task 3
Which of the following statements about the proposed acquisition of
Pixie Co are TRUE or FALSE?
Pixie Co would be consolidated on a line by line basis
Prite Co would recognize Pixie Co as a subsidiary in the financial
statements
Prite Co would not have to make a consolidation adjustment for
dividends received from Pixie Co
Pritie Co would recognize Pixie Co as an associate in the
consolidated financial statements.
Additional information:
During the year Glaza sold goods costing $100,000 to Vestan for
$120,000. None of these Vestan's inventory, but $20,000 is still an
outstanding inter-company balance at the year end.
Task 1
Complete the consolidated statements of the financial position and
the consolidated statements loss for the year ended 31 December
20X8.
$'000
Assets
Goodwill
Current assets
Current liabilities
Revenue
Less: cost of sales
Gross Profit
Less: Distribution costs
Administrative expenses
Profit before tax
Taxation
Profit for the year
Attributable to:
Non-controlling interest
Equity holders of the parent
Task 2
What is the principal concept behind the presentation of consolidated
financial statements?
a) Substance over from
b) Going concern
c) Accruals concept
d) Consistency