P/L=> Statement of changes in owners' equity=> Balance sheet=>Cash flow statement=> notes to FSs

Q1

Note 1
31/3/20x2
Sales of goods=> revenue from sales of goods is recognized for the year ended 31/3/2
Service renderred to customer in two years since 1/4/20x2=> service revenue is recog

Selling price = COGS+ markup

=COGS + COS*30%
Service revenue for 2 yrs= 800*2+800*2*30%=
COS:800*2
Shoul be done
For cash receipt from customers in advance
Dr Cash 2.080
Cr unearned service revenue

Correcting entries
J1: for revenue
Dr Service revenue
Cr Unearned service revenue
J2: for COS
Dr Inventory
Cr COS
Note 2
Property
Cost -1/4/20x1 48,000
Less: Acc dep -1/4/20 -16.000
CA - 1/4/20x1 32,000
Revalued amount 1/4 36,000
Amortization/ deprec 4,500
(36,000/8;14,000*20%)
CA - 31/3/20x2 31,500

J3: for reveluation

Dr Property
Cr Surplus on revaluation

J4: Amount transferred from surp

Dr surplus on revaluation
Cr RE

J5:depreciation/ amortiation
Dr COS: 4,500+2,800
Cr Acc amortiation-property
Cr acc depreciation-Plant&equip
 Note 3
FV of investment property 31/3/20x2
Less FV of IP at 31/3/20x2
Gain on change FV

Note 4 J7
Dr income tax expense
Cr Income tax payable
Statement P,L and other comprehence income
For the year ended 31/3/20x2
Currency unit(CU):$'000
Revenue: 280,800(per Q) -2,080(J1)
Less COGS
280,800(per Q)-1,600(J2)+7,300(J5)
Gross profit
Selling expense
Admin expense
Bank Interest expense
gain on change of FV(J6)
Loss before tax
Less: income tax expense(J7)
Net profit(loss)
Other comprehensive income
Surplus on revaluation(J3)
Total net loss and other comprehensive income

Pressco
Statement of financial position
As at 31/3/20x2
Currency unit (CU):$'000

A/R
Inventory: 25,200(per Q)+1,600(J2)
Property(note 2)
Plant & Equpment (note2)
IP:10,000(perQ)+2,000(J6)
Total assets
Liabilities and OE
Liabilities
Bank overdraft
A/P
unearned service revenue(J1)
income tax payable
Total liabilities

Owners' equity (w1)

 Equity share 45,000
Share premium 74,200
RE (46,480)
Revaluation surplus 3,500
Total OE 76,220
Total L + OE 76,220
w1 Equity share Share premium
Beg Bal (1/4/20x1) 45,000 74,200
Revaluation surplus increases
From Revaluation surplus => RE
Loss of the year (P/L)
End Bal (31/3/20x2) 45,000 74,200
 Bank
100,000 110,000

10,000 Bank overdraft( liability)

d for the year ended 31/3/20x2

=> service revenue is recognized only when service is renderred to customers

2.080
1,600
Did

Dr Cash 2.080
2.080 Cr Service revenue 2.080

Dr COS 1.600
Cr inventory 1.600

2.080 (-revenue, P/L)

earned service revenue 2.080 (+Unearned SR,B/S)

1.600 (+inventory,B/S)
1.600 (-COS,P/L)

Plant & Equipment

47,500 RE Susplus on revaluation
-33,500
14,000 500 500 4,000
N/A - non apply
2,800

11,200

reveluation
4,000 (+property,B/S)
urplus on revaluation 4,000 (+ other comprehensive income, P/L)

mount transferred from surplus on revaluation into RE

plus on revaluation 500 (B/S)
500 (+RE,B/S)

preciation/ amortiation
S: 4,500+2,800 7,300
cc amortiation-property 4,500
cc depreciation-Plant&equipment 2,800
 12,000
-10,000
2,000
J6:
Dr IP 2,000
Cr Gain on change of FV 2,000

ome tax expense 3,000

ncome tax payable 3,000
mprehence income

278,720

-275,100
-7,780
-16,100
-26,900
-300
2,000
-49,080
-3,000
-52,080

4,000
-48,080

sco
ancial position
3/20x2

28,500
26,800
31,500
11,200
12,000
110,000

1,400
27,300
2,080
3,000
33,780
RE Revaluation surplus
5,100 -
4,000
500 (500)
(52,080)
(46,480) 3,500
Q2 Items reported on trial balance +/- adjustment

a, Adjusting, correcting entries

For non curent asset
Property Plant & Equipment
Cost 1/4/20X1 48000 47500
Less: Acc amor/dep 1/1/20X1 -16000 -33500
CA -1/4/20X1 32000 14000
Amor/Dep expense 4000 2100
(32000/8; 14000*15%)
CA -31/3/20X2 28000 11900
Revalued amount 34000 N/A
Surplus on Revaluation 6000 N/A

J1: Dr Admin expense: 4000 + 2100

Cr Acc amor/dep

J2: Dr Property
Cr Surplus on revaluation
For investment property
FV at 31/3/20X2 8000
Less: FV at 1/4/20X1 10000
Loss from changes of FV 2000

J3: Dr loss from change of FV (expense)

Cr Investment property
For income tax expense
J4: Dr Income tax expense
Cr Income tax payable
For inventory
Book value of inventory a: 3000
Net realizable value (NRV) b: 2800
If a <= b: no adjustment
If a > b: Adjustment = a - b
J5: Dr Cost of sales
Cr Inventory
For R & D + Expense occur in research stage (phrase) => Treated as expense in their period in
+ Expense occur in development stage (phrase) => Capitallized into development c
1/4/20X1 ==========> 1/9/20X1 ==========> 1/1/20X2 ==========> 31/3/20X2
Beg date of,… Beg date of project….......> Beg of development….......> Reporting date
Expense/month = 40

Should be done
Total expenditure: 40*7 280
Dr Research expense: 40*4 160
Dr Development cost: 40*3 120
Cr Cash, …
 J6: Dr Research expense: 40*4 160
Dr Development cost: 40*3 120
Cr COS

b, P, L and other comprehensive income

For the year 31/3/20X2

Revenue: 280,800(per Q)
Less COS
Gross profit
Selling expense
Admin expense: 26900 (per Q) +6100
Bank Interest expense
Loss on change of FV (J3)
Research expense (J6)
Loss before tax
Less: income tax expense(J7)
Net profit(loss)
Other comprehensive income
Surplus on revaluation(J3)
Total net loss and other comprehensive income

c) Fressco
Statement of financial position
As at 31/3/20x2
Currency unit (CU):$'000
Asset
A/R 28,500
Inventory: 25,200(per Q) - 200 25,000
Property 34,000
Plant & Equpment 11,900
IP:10,000(perQ) - 2,000 8,000
Development cost 120
Total assets 107,520

Liabilities
Bank overdraft 1,400
A/P 27,300
income tax payable 1,500
Total liabilities 30,200
Owners' equity
Equity share 45,000
Share premium 74,200
RE (47,880)
Revaluation surplus 6,000
Total OE 77,320
Total L + OE 107,520
se: 4000 + 2100 6100
6100

6000
revaluation 6000

nge of FV (expense) 2000

2000

1500
1500

= Estimated selling price - Estimated costs to complete - Estimated selling expense

a-b 200
a-b 200
Treated as expense in their period in which the occur
=> Capitallized into development cost

Did
Dr COS 280
Cr Cash, … 280

280
 280

CU: $000

280,800
-280720
80
-16,100
-33,000
-300
-2,000
-160
-51,480
-1,500
-52,980

6,000
-46,980

Currency unit (CU):$'000

Q3
a) adjusting entries (correcting)
For note i
Should be done Did
Dr Cash 20000 Dr Cash
Cr A/P (20000*90%) 18000 Cr Sale revenue
Cr Service revenue 2000

Dr A/P 15000 Dr COS

Cr Cash 15000 Cr Cash

J1 Dr Service Revenue 18000

Cr COS 15000
Cr A/P 3000

For note iii

Property P&E
Cost - 1/4/20x3 40000 250000
Less: Acc dep 1/4/20x3 -16000 -33500
CA - 1/4/20x3 24000 216500
Dep expense 2000 27063 29063
(40000/20; 216500*12.5%
CA 31/3/20x4 (before impairment

J2 Dr COS 29063
Cr Acc dep 29063
- Property 2000
- P&E 27063

For note iv
J3 Dr Income tax expense 28000
Cr Acc dep 28000

For note ii
Carying amount (up to date) 65000 CA = RA => No impairment loss
Recoverable amount 77313 CA < RA => No impairment loss
The higher of net FV or value in use CA > RA => Impairment loss = CA - RA
Net FV: 78000-2500 75500
Value in use: 77313
30000/1.08 + 30000/1.08^2 + 30000/1.08^3
=> As RA = 77313 > CA = 65000 => No impairment loss => No need for adjustment

For note v
Dr Bad debt expense 15
Cr A/R 15

Statement of profit or loss

 Revenue 521,500
Less: COS 294,863
Gross profit 226,638
Less:
Distribution costs 16,100
Admin exp 26,900
Bank interest 300
Bad Debt Exp 15
Profit or loss before tax 183,323
Income TAX exp 28,000
Profit 155,323
Other comprehensive income 0
Total profit loss and other comprehensive income 155,323
 20000
Cr Sale revenue 20000

15000
15000

> No impairment loss

> No impairment loss
> Impairment loss = CA - RA

Statement of financial position

Asset
Current asset
 A/R 28,485
Inventory 25,200

Non-current asset
Property 22,000
PPE 189,438
Total asset 265,123

Liabilities

Bank 1,400
Trade payable 30,300
Income tax payable 28,000
Total Liabilities 59,700

Owner's Equity
Equity share 40,000
Share premium 5,000
Retained earning 160,422
Total equity 205,422

Total Liability and equity 265,122

Consolidated FSs
A/ Group
* Definition: economic antity that consists of at least one subsidiary & a parent company
* Parent company: that controlls subsidiaries
* Subsidiary company: that is controlled by parent company
* Criteria for control
Case 1: directlyor indirectly, investor holds more 50% voting right of investee
P - investor
100*70%=30%

S: issued and outstanding 10000 common shares

P: acquired 7000 common shares of 5
=> Voting right % of P in S = ? 7000/10000*100 = 70% > 50% S - investee
Dividend: 100
P is able to control over S
S is controlled by P => S is a subsidiary of P

S1: issued and outstanding: 6

S acquired 3600 of S1
P - investor Voting right % of S in S1: 360
60*70%=42 => S is a parent of S1
=> S1 is a subsidiary of S1
Voting right = 70%

S - investee
100*60% = 60 30% non controlling interest (NCI)

Voting right = 60%

S1 40% NCI
Dividend : 100
Voting right of P in S1 = 70% > 50%
=> S1 is also a subsidiary of P

Economic benefit of P in S1 = 70%*60%

Case 2: Voting right < 50% + other conditions => investor is able to control over investee

Other conditions:
- P is a major customer of S
- P is a major supplier of S
P - investor Individual FSs of P - 4/5 board of director is representative of P
…

Voting right = 45%

S - investee
Warehouse # 1
 S - investee
Individual FSs of S Warehouse # 1

Consolidated FSs

B/ Basic priciples for preparation of Consolidated FSs

* Whole group is regarded as a single entity
=> Data from intra-groups transactions must be adjusted or eliminated
* The order for preparation of consolidated FSs
- Step 1: Line - By - Line combination
- Step 2: Adjustment and eliminations

C/ Items adjusted or eliminated

c1. Investment in S (reported on B/S of P) eliminated against Owners' equity of S (report on B/S of S)
=> Avoide overlap assets, OE
=> Example
P P S Line By LinEliminatedConsolidated Results
Cash 100000 80000 20000 100000 100000
Investment in S 20000 20000 -20000 0
Share capit 100000 100000 20000 120000 -20000 100000

Different = Acquisition + Fair value of NCI - Fair value of identifiable net assets of S (FVINA)
If Different > 0 => Different called positive goodwill (goodwill)
If Different < 0 => Different called negative goodwill (bargain on purchase)

Q1.
a) Acquisition analysis
Acquisition costs $'000
Cash paid 92000
Defered payment: 28000/(1+8% 24005
116005
FV of NCI 15000 Available
131005
Less: FVINA Book value= Identifiable net asset = OE
Equity share 60000 = Total assets - Total liabilities
RE (1/10/20X4) 34000
Revaluation surplus 4000
FV > BV of inventory 600
(3600-3000)
98600
Goodwill: 131005 - 98600 32405

c2. Eliminating unrealized profit

Sold to S $13/unit

100 units, cost $10/unit

P S
 P S

Case 1: 100 units of inventory were sold by S to outsider, selling price/unit: $15
P S Line By LineEliminationConsolidated results
Sale reven 1300 1500 2800 -1300 1500
COS 1000 1300 2300 -1300 1000
300 200 500

Inventory - - - => End unrealized profit = 0

Dr Sales 1300
Cr COS 1300
Case 2: 1/2 inventory purchased from P were sold by S to outsider, selling price/unit: $15
P S Line By LineEliminationConsolidated results
Sale reven 1300 750 2050 -1300 750
COS 1000 650 1650 -1150 500
300 100 250

Inventory - 650 650 -150 500

1150 = Intra group sales - End unrealized profit (end URP)

= 1300 - 150 1150
=> Consolidated COS = COS of P + COS of S - Eliminated amount
= 1000 + 650 -1150 500
End URP = 650 - 500 = 150

W2 Ending URP
Group profit % = (Revenue - COS)/Revenue * 100%
25% = (8000 - COS)/8000
=> COS = 8000 - 25%*80000 = 75% * 8000 6000
Total intra group: 8000 - 6000 2000
=> End URP: 2000*1/ 250
If P is seller => downstream transactions
+ 100% URP must be eliminated
+ 100% URP attributable to only P
If P is purchaser => upstream transactions
+ 100% URP must be eliminated
+ URP attributable to both Parent and NCI

W3 Consolidated inventory: Current assets

Current assets of P 94700
Add: current assets of 44650
Less: end URP (W2) -250
 Consolidated invento 139100

W4 Consolidated RE
RE of P 210000
Add: RE of S increased 2000
(36500 - 34000)*80%
Less: End URP (downs -250
Less: Interest on def -1920
(24005*8%)
Consolidated RE 209830

W5 NCI 15000
NCI at acquisition date 5000
Add: RE of S incresed post to acquit
(36500-34000)*20% 15500
NCI at 30/09/20X5

Party and its subsidaries

Consolidated statement of financial position
As at 30/09/20X5
CU: $'000
Assets
NCA
-PPE: 392000+84000 476000
-Goodwill (W1) 32405
Current assets: 94700 + 44650 - 250 + 600(W3) 139100
Total assets 648105

Equity
-Equity shares: 190000 + 60000 - 60000 190000
-RE (W4) 209830
-Surplus on revaluation: 41400
441230
-NCI (W5) 15500
Total equity 456730

Liabilities
NC liability
Deferred consideration: 116005 + 1920(W4) 117925
Current liability: 45300 + 28150 73450
Total liability 191375

Total OE + L 648105

Q3.
 1/4/2015==================> 1/10/2015================>31/3/2016
W1 Acquisition analysis
Goodwill = Acquisition cost + FV of NCI - FVINA
Goodwill at reporting date = Goodwill at acquisiton - Acc. Impairments
Acquisition cost
- Number of acquired shares: 9000*60% 5400
- Number of exchanged shares 2700
- Fair value of exchange shares: 3*2700 8100
-PV of deferred payment: 0.54*5400/(1+8%)^1 2700
10800
FV of NCI: 9000*40%*1.5 5400
16200
Less: FVINA
- Equity share 9000
- Open bal of RE 8600
- Loss accrual from 1/4/2015 to 1/10/2015 -1500
(3000/12*6)
- FV<BV of plant -2500 13600
Goodwill at acquisition: 16200-13600 2600
Less: Accumulative impairment loss 0
Goodwill at reporting date (31/3/2016) 2600

W2 Consolidated PPE BV
FV (consolidated)
Useful
S Consolidation
Dep. Expen 2000 1500
Dep. Expense
PPE of P 25400
Add: PPE of S 13500
Less: FV<BV -2500
Add: Diff in dep. Expense as FV<BV 500
Consolidated PPE 36900

W3 Consolidated financial assets

FA of P 6100
FA of S 1800
Consolidated FA 7900

W4 Inventory
Downstream sale transactions => Total URP attributable to only P
Selling price = COS + COS*35% = COS*135%
2430 = COS*135%
=> COS = 2430/135% = 1800
Ending URP: 2430-1800 630

Inventory of P 12700
 Add: Inventory of S 5300
Less: Ending URP -630
Consolidated inventory 17370

W5 Consolidated RE
RE of P
Less: Lost post to acquisition attributable to P
(-3000/12*6*60%)
Less: URP downstream
Add: Diff in dep as FV<BV
(500*60%)
Less: Interest on deferred payment
(2700*8%/12*6)
Add: FV>BV

W6 NCI
 P - investor
100*70%=30%

Voting right = 70%

S - investee 30% non controlling interest (NCI)

Dividend: 100

S1: issued and outstanding: 6000

S acquired 3600 of S1
Voting right % of S in S1: 3600/6000 = 60% > 50%
=> S is a parent of S1
=> S1 is a subsidiary of S1

interest (NCI)

ht of P in S1 = 70% > 50%

so a subsidiary of P

benefit of P in S1 = 70%*60%=42%

or is representative of P

Warehouse # 1 Warehouse # 2
Warehouse # 1 Warehouse # 2

External

Dr Investment in S 20000
Cr Cash 20000
Zanda Medda
1 => 2
2700 <= 5400

Months
Difference
500
Q3 - Review
a) Goodwill on acquisition = Acquisition cost + FV of NCI - FVINA
Acquisition cost
FV of exchange shares
+ Number of shares acquired: 100000*90% 90000
+ Number of new shares issued: 2*90/3 60000
+ FV of new shares issued: 6.5*60000 390000
Present value of deferred payment: 90000*1.76/(1+10%)61 144000
534000
FV of NCI
+Number of shares held by NCI: 100000*10% 10000
+FV/share 2.5
+FV of NCI 25000
559000

Less: FVINA
Share capital 100000
RE 1/10/20x1 350000
Add: Net profit accrual from 1/10/20x1 => 1/1/20x2 16500
66000/12*3
Fv > BV of plant 1800 468300
Goodwill at acuisition date 90700
Less: Impairment of goodwill -20000
Goodwill at reporting date 88700

b) Consolidated revenue = Revenue of P + Revenue of S post to acquisiton - Inter group sales (post acquisition)
Revenue of P
Add: Revenue of S post to acquisition
240000/12*9 18000
Less: Intra group sales 800*9 7200
Consolidated revenue 622800

c) Consolidated COS = COS of P + COS of S post to acquisition - Intra-group - end URP

Selling price = COS + COS*25% = COS*1.25 => COS = Selling price/1.25
Selling price 1500
COS: 1500/1.25 1200
End URP: 1500-1200 300
COS of P 260000
Add: COS of S: 110000/12*9 82500
Less: Intra group sale -7200
Add: End URP 300
Add: Excess of Dep expense as FV>BV 450
(1800/36*9)
Consolidated COS 336050

d) Admin expense of P 27000

Add: Admin expense of S post to acquisition 17250
23000-12*9
 44250

e) Consolidated finance costs = Finance cost of P + Finance cost of S post to acquisition +(-) other adjustments
Finance cost of P 1500
Add: Finance cost of S post to acquisition 900
1200/12*9
Add: Interest expense on defered payment 10800
144000*10%/12*9
Consolidated finance cost 13200

f) Tax expense of P 48000

Add: Tax expense of S: 27800/12*9 20850
Consolidated tax expense 68850

g) Consolidated net profit = Consolidated income (sale revenue) - Consolidated expense (COGS,admin,…)
Consolidated revenue 622800 (b)
Less: Consolidated COS 366050 (c)
286750
Less:
- Distribution cost: 23600+12.000/12*9 32600
- Admin expense 44250 (d)
- Finance cost 13200 e
- Impairment loss of goodwill 2000

Profirt before tax 194700

Less: Income tax expense 68850
Consolidated net profit 125850

h) Net profit attributable to NCI

= Net profit of S post to acquisition from consolidation attributable to NCI
Net profit of S post to acquisition attributable to NCI 4950
66000/12*9*10%
Less: Impairment of goodwill: 2000*10% 200
Less: Excess of dep exp as FV > BV of plant 45
450*10%
Net profit attributable to NCI 4705

i) Consolidated net profit 125850

Less: Net profit attributable to NCI 4705
Net profit atributable to P 121145

Q4
a) Goodwill on acquisition = Acquisition cost + FV of NCI - FVINA
Acquisition cost
FV of exchange shares
+ Number of shares acquired: 7200
 + Number of new shares issued: 4800
+ FV of new shares issued: 14400
Present value of deferred payment: 10080
24480
FV of NCI
+Number of shares held by NCI: 100000*10% 900
+FV/share 2.5
+FV of NCI 2250
Acquisition cost 26730

Less: FVINA
Share capital 9000
RE 1/10/20x1 3500
Add: Net profit accrual from 1/10/20x1 => 1/1/20x2 4950
Fv > BV of plant 720 18170
Goodwill at acuisition date 8560
Less: Impairment of goodwill -500
Goodwill at reporting date 8060

b) Consolidated revenue = Revenue of P + Revenue of S post to acquisiton - Inter group sales (post acquisition)
Revenue of P 45000
Add: Revenue of S post to acquisition 18000
Less: Inter group sales: 420*9 -3780
Consolidated revenue 59220

c) Consolidated COS = COS of P + COS of S post to acquisition - Intra-group - end URP

Selling price = COS + COS*20% = COS*1.2 => COS = Selling price/1.2
Selling price 3000
COS: 300/1.2 2500
End URP:150-120 500
COS of P 26000
Add: COS of S: 11000/12*9 8250
Less: Inter group sale -3780
Add: End URP 500
Add: Excess of Dep expense as FV>BV 180
(720/36*9)
Consolidated COS 31150
 Paid with cash
Paid with exchange share
Deferred payment (bonds, debentures)

Viagren Graca
2===============> 3
? <============== 90000

Available
= Number of shares held by NCI * FV of share/unit

1/10/x1=========> 1/1/20x2========> 30/9/20x2

Acquisition

es (post acquisition)
) other adjustments

OGS,admin,…)
es (post acquisition)
Q2
1/4/204 ================> 1/7/2014 ================> 31/3/2015
Acquisition date
3 months 9 months

a) Goodwill at acquisition = Acquisition cost + FV NCI - FVINA

Acquisition cost
Number of shares acquired: 12000*80% 9,600
Number of shares exchanged: 9600*2/3 6,400
FV of exchanged shares: 3*6400 19,200
Present value of deferred payments 13,440
1.54*9600/1.1
Acquisition cost 32,640
FV of NCI
12000*20%*2.5 6,000
FVINA
Equity shares 12,000
RE 1/4/2014 13,500
Net profit accrual from 1/4/2014 600
2400/12*3
FV > BV of plant 720 26,820
Goodwill at acquisition: 32640+6000-26820 11,820
Less: Acc. Impairment loss (500)
Goodwill at reporting date 31/3/2015 11,320

b) Line by line
Revenue & expense
Revenue, expense for parent: whole
Revenue, expense for subsidiary: post to acquisition
(i) Consolidates revenue
Revenue of Bycomb 24,200
Add: Revenue of Cyclip post to acquisition 8,100
Less: Intra sale (3,000)
Consolidated revenue 29,300

(ii) Consolidated COS = COS of P + COS of S post to acquisition - Intra group - End URP +/- other adjustments
Ending unrealized profit COS of P
Selling price = COS + COS*20% = COS*1.2 => COS = Selling price/1.2 Add: COS of S
Selling price 420 Less: Intra group sale
COS 350 Add: End URP
End URP: 70 Add: Excess of Dep expense as FV>BV
Add: Impairment loss of goodwill
Consolidated COS

iii) Consolidated finance costs = Finance cost of P + Finance cost of S post at acquisition +/- other adjustments
Finance cost of P 400
Add: Finance of S post to acquisition 225
Add: Interest expense on deferred payment 1,008
 Consolidated finance costs 1,633

iv) Net profit attributable to NCI = Net profit of S post to acquisition from consolidation attributable to NCI
= Net profit of S post to acquisition from consolidation attributable to NCI
Net profit of S post at acquisition attributable to NCI 360
Less: Impairment of Goodwill: 500*20% (100)
Less: excess of dep expense as FV > BV of plant (72)
Net profit attributable to NCI 188
 other adjustments
17,800
5,100
a group sale (3,000)
70
ss of Dep expense as FV>BV 360
airment loss of goodwill 500
20,830

+/- other adjustments

attributable to NCI