1

Consolidation Plateau ACCA Decemer 2007

2

Step 1 Copy out the question

P S Adjustments

Consolidated

PPE 18400 10400Investments 13250 0Fval Inv 6500 30

Inventory 6900 6200Receivables 3200 1500Bank 0 0

48250 18100

3

Step 1 Copy out the question

P S Adjustments

Consolidated

Equity 10000 4000

Ret Earnings

16000 +9250

6500+ 2400

7% Loan 5000 1000

Payables 8000 4200

Overdraft 0 0

48250 18100

4

Consolidation Format- Goodwill

What did we pay? What did we get?

Date 1 October 2006

Acquired 3m shares, =75%

Paid 3m x 0.5x 6= 9m

Cash 1.25 x3m = 3.75m

Total paid $12.75

5

Consolidation Format- Goodwill

Paid $12.75m + NCIs $3.25m = $16m

Received

Shares 4m

Retained earnings = 6.5m

Fair value adjustments = $(0.5)m (note 1)

Goodwill = 16- 10= 6m on acquisition

6

Consolidation Format- S Retained Earnings On Acquisition 30 September

2007

Share Capital 4000 4000

Retained Earnings 6500 8900

Fair value adjustment

(500)

Interco Profit (300)

Total 10000 12600

7

Consolidation Format- Retained Earnings

P = 25250 Acquisition costs (500) Fair V investments 2500 S post acq 2600x75%= 1950 Axle 1500

Total 30700

8

Consolidation Format- NCI

Value at acq 3250

Post acq Res (2600x25%)

650

Total 3900

9

P S Adjustments

Consolidated

PPE 18400 10400 28800

Investments 13250 0 (13250) 0

Goodwill 6000 6000

Axle 9000+1500 10500

Fval Inv 6500 2500 9000

Inventory 6900 6200 (300) 12800

Receivables 3200 1500 4700

Bank 0 0

48250 18100 71800

10

P S Adjustments

Consolidated

Equity 10000 4000 -4000 +1500

11500

Share Premium

7500(1.5mx 5)

7500

Ret Earnings

16000 +9250

6500+ 2400

30700

7% Loan 5000 1000 6000Payables 8000 4200 12200NCI 3900Overdraft 0 0

48250 18100 71800