a)BU6013 Consolidated statement of financial position – K Group as at

30 November 2019

Non-current assets £
Goodwill (W3) 72,000
Property, plant and equipment (168,000+115,000) 283,000
Investments 0
________
355, 000
________

Current assets
Inventory (20,000+22,000-2,500)) (W6) 39,500
Receivables (24,000 + 25,000 – 6,000 inter co) 43,000
Bank and cash (7,000+5,000+1,500 cash in transit) 13,500
_______
96,000

Total assets 451,000___

Equity
Share capital 98,000
Retained earnings (W5) 181,100

Non-controlling interest (W4) 40,400

Non-current liabilities
8% debentures (30,000+20,000) 50,000

Current liabilities
Payables (48000 +38000-4,500 interco) 81,500
_______
451,000
_______

 Adjust for cash in transit as it will have been taken out of the bank of one of the
group but not yet appearing the bank of the other group member. If we did not
add it in, it would not be represented in the group figures.
 Adjust receivables as the £6,000 is an intra group transaction and as group
accounts treats the ‘group’ as a single entity inter group transactions should be
contra’d off.
Workings for the CSFP above

1. ONCE YOU HAVE WRITTEN OUT YOUR PRO-FORMA AS ABOVE,

COMPLETE W1-W7.

2. NOW ADD ACROSS THE PARENT AND SUBSIDIARY ASSETS AND

LIABILITIES AND INSERT FIGURES ONTO THE CSFP.

3. REMEMBER: SHARE CAPITAL OF THE GROUP IS THE SHARE CAPITAL

OF PARENT ONLY.

4. DO NOT INCLUDE THE PARENT’S INVESTMENT IN THE SUBSIDIARY

IN THE CSFP AS THIS IS REPRESENTED BY THE NET ASSETS
ACQUIRED AND ANY EXCESS IS CALCULATED AS GOODWILL.

(W1) GROUP STRUCTURE

Parent owns 60% of subsidiary.

(W2) NET ASSETS OF SUBSIDIARY

Acquisition date Reporting date

Share capital 35,000 35,000
Retained Earnings 50,000 74,000

PUP (If subs is the seller) (2,500)

85,000 106,500
________ _______

Post -acquisition reserves = £21,500 (£106,500 - £85,000)

(W3) Goodwill

£
Cost of investment 130,000

FV of NCI 35,000
Fair value of net assets acquired. W2-(100% x 85,000) (85,000)
________
Goodwill at acquisition 80,000
Impairment (we are told this in the question) (8,000)
________
Goodwill at reporting date 72,000
________

The difference between what we pay for the company and the fair value of its assets gives
us the goodwill at acquisition.

We are told there is impairment of £8,000 by the reporting date so we need to deduct this
amount from the goodwill to represent the value of goodwill at the reporting date. Since
NCI is valued using the FV method, the impairment is apportioned between NCI
and Retained earnings.

DR Group Retained earnings (60% x 8000) 4,600

DR NCI (40% x 8000) 3,200
Cr Goodwill 8,000

(W4) Non controlling interest

Non-controlling interests
At Acq 35,000
Post acq 40% x 21,500 8,600
Impairment 40% x 8,000 (3,200)
–––––––
non-controlling interest 40,400

(W5) Consolidated reserves R.Earnings.

£
K – Parent 173,000
S – Subs (106,500 - 85,000) x 60% 12,900

PUP -

Impairment (W3) (8,000 x 60%) (4,800)

_______
181,100
_______

We deduct the PUP from sub’s net assets as S sold the goods and therefore made the
profit on sale and we also adjust the inventory figures as at the year end this PUP makes
up part of the stock figure.

(W6) PUP

25/100 x 10,000 = £2,500

As S sold the goods we adjust W2 and the inventory on the face of the CSFP.

DR Sub’s net assets at reporting date (W2) 2,500

CR Inventory 2,500

Please note: If K had sold the goods instead, we would have adjusted W5 and the
inventory on the face of the CSFP.

DR Group Retained Earnings (W5) 2,500

CR Inventory 2,500

(W7) INTER-CO BALANCE ELIMINATION

DR Bank 1,500
DR Payables 4,500
CR Receivables 6,000
b)BU6013 Consolidated statement of financial position – K Group as at
30 November 2019

Non-current assets £
Goodwill (W3) 71,000
Property, plant and equipment (168,000+115,000) 283,000
Investments 0
________
354, 000
________

Current assets
Inventory (20,000+22,000-2,500)) (W6) 39,500
Receivables (24,000 + 25,000 – 6,000 inter co) 43,000
Bank and cash (7,000+5,000+1,500 cash in transit) 13,500
_______
96,000

Total assets 450,000___

Equity
Share capital 98,000
Retained earnings (W5) 177,900

Non-controlling interest (W4) 42,600

Non-current liabilities
8% debentures (30,000+20,000) 50,000

Current liabilities
Payables (48000 +38000-4,500 interco) 81,500
_______
450,000
_______
  Adjust for cash in transit as it will have been taken out of the bank of one of the
group but not yet appearing the bank of the other group member. If we did not
add it in, it would not be represented in the group figures.
 Adjust receivables as the £6,000 is an intra group transaction and as group
accounts treats the ‘group’ as a single entity inter group transactions should be
contra’d off.

Workings for the CSFP above

5. ONCE YOU HAVE WRITTEN OUT YOUR PRO-FORMA AS ABOVE,

COMPLETE W1-W7.

6. NOW ADD ACROSS THE PARENT AND SUBSIDIARY ASSETS AND

LIABILITIES AND INSERT FIGURES ONTO THE CSFP.

7. REMEMBER: SHARE CAPITAL OF THE GROUP IS THE SHARE CAPITAL

OF PARENT ONLY.

8. DO NOT INCLUDE THE PARENT’S INVESTMENT IN THE SUBSIDIARY

IN THE CSFP AS THIS IS REPRESENTED BY THE NET ASSETS
ACQUIRED AND ANY EXCESS IS CALCULATED AS GOODWILL.

(W1) GROUP STRUCTURE

Parent owns 60% of subsidiary.

(W2) NET ASSETS OF SUBSIDIARY

Acquisition date Reporting date

Share capital 35,000 35,000
Retained Earnings 50,000 74,000

PUP (If subs is the seller) (2,500)

85,000 106,500
________ _______
Post -acquisition reserves = £21,500 (£106,500 - £85,000)

(W3) Goodwill

£
Cost of investment 130,000

BV of NCI (40% x 85,000) 34,000

BV value of net assets acquired. W2-(100% x 85,000) (85,000)
________
Goodwill at acquisition 79,000
Impairment (we are told this in the question) (8,000)
________
Goodwill at reporting date 71,000
________

The difference between what we pay for the company and the fair value of its assets gives
us the goodwill at acquisition.

We are told there is impairment of £8,000 by the reporting date so we need to deduct this
amount from the goodwill to represent the value of goodwill at the reporting date. Since
NCI is valued using the proportionate method, the impairment is wholly allocated to
Retained earnings.

DR Group Retained earnings 8,000

Cr Goodwill 8,000

(W4) Non controlling interest

Non-controlling interests
At Acq 34,000
Post acq 40% x 21,500 8,600
Impairment (FV Method only)
–––––––
non-controlling interest 42,600

(W5) Consolidated reserves R.Earnings.

£
K – Parent 173,000
S – Subs (106,500 - 85,000) x 60% 12,900

PUP ( If parent is the seller) -

Impairment (W3) (8,000 x 100%) (8,000)

_______
177,900
_______

We deduct the PUP from sub’s net assets as S sold the goods and therefore made the
profit on sale and we also adjust the inventory figures as at the year end this PUP makes
up part of the stock figure.

(W6) PUP

25/100 x 10,000 = £2,500

As S sold the goods we adjust W2 and the inventory on the face of the CSFP.

DR Sub’s net assets at reporting date (W2) 2,500

CR Inventory 2,500

Please note: If K had sold the goods instead, we would have adjusted W5 and the
inventory on the face of the CSFP.

DR Group Retained Earnings (W5) 2,500

CR Inventory 2,500

(W7) INTER-CO BALANCE ELIMINATION

DR Bank 1,500
DR Payables 4,500
CR Receivables 6,000