Pacific Co: consolidated statement of financial position workings

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Consideration = cash $1,000,000 + shares 200,000 x $3.00 ($600,000) = $1,600,000.
• The shares issued are valued at fair value at the acquisition date.
• Net assets of Sunrise Co at acquisition at fair value = share capital 500,000 + retained earnings 900,000 + land adjustment 300,000 = $1,700,000.
• The fair value of the NCI is added, because the NCI is valued at fair value ($380,000).
• Goodwill = 1,600,000 + 380,000 - 1,700,000 = $280,000.

Marks counted: 0 of 5

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Unrealised profit = $150,000 x 25/125 = $30,000. The mark-up is on cost, so the profit is 20 percent of the transfer price.
• Post-acquisition profit of Sunrise Co = $1,350,000 - $900,000 = $450,000.
• Sunrise Co sold the goods, so the unrealised profit is deducted from its profit, and the NCI shares in it.
• Adjusted post-acquisition profit = 450,000 - 30,000 = $420,000.
• NCI share of the adjusted profit = 20% x 420,000 = $84,000.
• NCI share of the goodwill impairment = 20% x $40,000 = $8,000, which is deducted, because the NCI was valued at fair value.
• NCI at 31 December 20X5 = 380,000 + 84,000 - 8,000 = $456,000.

Marks counted: 0 of 7

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Pacific Co's retained earnings = $2,000,000.
• Pacific Co's share of the post-acquisition profit of Sunrise Co after the unrealised profit adjustment = 80% x 420,000 = $336,000.
• Pacific Co's share of the goodwill impairment = 80% x $40,000 = $32,000, which is deducted.
• Consolidated retained earnings = 2,000,000 + 336,000 - 32,000 = $2,304,000.

Marks counted: 0 of 4

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• The group is a single economic entity, so a profit is only realised when the goods are sold outside the group.
• If it was not eliminated, the group's inventories and profit would be overstated.
• Fair values give a fair measure of what the group has acquired, and the carrying amount may not reflect current values.
• Using carrying amounts would overstate goodwill, because the land would be understated.
• Goodwill is the premium paid for the unidentifiable benefits, so it must be measured after the fair values of identifiable assets are recognised.

Marks counted: 0 of 4