P a p e r F 7 ( I N T )
ALL FIVE questions are compulsory and MUST be attempted
1On 1 October 2010 Prodigal purchad 75% of the equity shares in Sentinel. The acquisition was through a share exchange of two shares in Prodigal for every three shares in Sentinel. The stock market price of Prodigal’s shares at
1 October 2010 was $4 per share.
The summarid statements of comprehensive income for the two companies for the year ended 31 March 2011 are:
昆仑山Prodigal Sentinel
$’000$’000 Revenue450,000240,000
Cost of sales(260,000)(110,000)
––––––––––––––––––Gross profit190,000130,000
Distribution costs(23,600)(12,000)
Administrative expens(27,000)(23,000)
Finance costs (1,500)(1,200)
––––––––––––––––––Profit before tax137,90093,800
Income tax expen(48,000)(27,800)
––––––––––––––––––Profit for the year89,90066,000
––––––––––––––––––Other comprehensive income
Gain on revaluation of land (note (i))2,5001,000
Loss on fair value of equity financial ast investment(700)(400)
––––––––––––––––––
1,800600
––––––––––––––––––T otal comprehensive income91,70066,600
––––––––––––––––––The following information for the equity of the companies at 1 April before the share exchange took place) is available:
$’000$’000 Equity shares of $1 each250,000160,000
Share premium100,000nil
Revaluation rerve (land)8,400nil
Other equity rerve (re equity financial ast investment)3,2002,200
Retained earnings90,000125,000
The following information is relevant:
(i)Prodigal’s policy is to revalue the group’s land to market value at the end of each accounting period. Prior to its
acquisition Sentinel’s land had been valued at historical cost. During the post acquisition period Sent
inel’s land had incread in value over its value at the date of acquisition by $1 million. Sentinel has recognid the revaluation within its own financial statements.
浊酒一杯家万里(ii)Immediately after the acquisition of Sentinel on 1 October 2010, Prodigal transferred an item of plant with a carrying amount of $4 million to Sentinel at an agreed value of $5 million. At this date the plant had a remaining life of two and half years. Prodigal had included the profit on this transfer as a reduction in its depreciation costs.
All depreciation is charged to cost of sales.
(iii)After the acquisition Sentinel sold goods to Prodigal for $40 million. The goods had cost Sentinel $30 million.
$12 million of the goods sold remained in Prodigal’s closing inventory.
(iv)Prodigal’s policy is to value the non-controlling interest of Sentinel at the date of acquisition at its fair value which the directors determined to be $100 million.
(v)The goodwill of Sentinel has not suffered any impairment.
(vi)All items in the above statements of comprehensive income are deemed to accrue evenly over the year unless otherwi indicated.
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Required:
显卡风扇噪音大(a)(i)Prepare the consolidated statement of comprehensive income of Prodigal for the year ended 31 March
2011;
(ii)Prep are the equity ction (including the non-controlling interest) of the consolidated statement of financial position of Prodigal as at 31 March 2011.
Note: you are NOT required to calculate consolidated goodwill or produce the statement of changes in equity.
The following mark allocation is provided as guidance for this requirement:
(i)14 marks
(ii)7 marks
(21 marks)
(b)IFRS 3 Business combinations permits a non-controlling interest at the date of acquisition to be valued by one
of two methods:
(i)at its proportionate share of the subsidiary’s identifiable net asts; or
(ii)at its fair value (usually determined by the directors of the parent company).
Required:
Exp lain the difference that the accounting treatment of the alternative methods could have on the consolidated financial statements, including where consolidated goodwill may be impaired.(4 marks)
(25 marks)
3[P.T.O.
2The following trial balance relates to Highwood at 31 March 2011:
$’000$’000 Equity shares of 50 cents each56,000 Retained earnings (note (i))1,400 8% convertible loan note (note (ii))30,000 Freehold property – at cost 1 April 2005 (land element $25 million (note (iii)))75,000
Plant and equipment – at cost 74,500
Accumulated depreciation – 1 April 2010 –building10,000
–plant and equipment24,500 Current tax (note (iv))800 Deferred tax (note (iv))2,600 Inventory – 4 April 2011 (note (v))36,000
T rade receivables 47,100
Bank11,500 T rade payables24,500 Revenue 339,650 Cost of sales 207,750
茨菰
Distribution costs 27,500
Administrative expens (note (vi))30,700
长泰砂仁Loan interest paid (note (ii))2,400
浪漫的话
虫草怎么吃效果最好––––––––––––––––
500,950500,950
––––––––––––––––The following notes are relevant:
(i)An equity dividend of 5 cents per share was paid in November 2010 and charged to retained earnings.
(ii)The 8% $30 million convertible loan note was issued on 1 April 2010 at par. Interest is payable annually in arrears on 31 March each year. The loan note is redeemable at par on 31 March 2013 or convertible into equity shares at the option of the loan note holders on the basis of 30 equity shares for each $100 of loan note.
Highwood’s finance director has calculated that to issue an equivalent loan note without the conversion rights it would have to pay an interest rate of 10% per annum to attract investors.
The prent value of $1 receivable at the end of each year, bad on discount rates of 8% and 10% are:
8%10%
男寡妇上坟End of year 10·930·91
20·860·83
30·790·75
(iii)Non-current asts:
On 1 April 2010 Highwood decided for the first time to value its freehold property at its current value. A qualified property valuer reported that the market value of the freehold property on this date was $80 million, of which $30 million related to the land. At this date the remaining estimated life of the property was 20 years. Highwood does not make a transfer to retained earnings in respect of excess depreciation on the revaluation of its asts.
Plant is depreciated at 20% per annum on the reducing balance method.
All depreciation of non-current asts is charged to cost of sales.
(iv)The balance on current tax reprents the under/over provision of the tax liability for the year ended 31 March 2010. The required provision for income tax for the year ended 31 March 2011 is $19·4 million. The difference between the carrying amounts of the net asts of Highwood (including the revaluation of the property in note (iii) above) and their (lower) tax ba at 31 March 2011 is $27 million. Highwood’s rate of income tax is 25%.
(v)The inventory of Highwood was not counted until 4 April 2011 due to operational reasons. At this date its value at cost was $36 million and this figure has been ud in the cost of sales calculation above. Between the year end of 31 March 2011 and 4 April 2011, Highwood received a delivery of goods at a cost of $2·7 million and made sales of $7·8 million at a mark-up on cost of 30%. Neither the goods delivered nor the sales made in this period were included in Highwood’s purchas (as part of cost of sales) or revenue in the above trial balance.
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(vi)On 31 March 2011 Highwood factored (sold) trade receivables with a book value of $10 million to Easyfinance.
Highwood received an immediate payment of $8·7 million and will pay Easyfinance 2% per month on
any uncollected balances. Any of the factored receivables outstanding after six months will be refunded to Easyfinance. Highwood has derecognid the receivables and charged $1·3 million to administrative expens.
If Highwood had not factored the receivables it would have made an allowance of $600,000 against them. Required:
(i)Prepare the statement of comprehensive income for Highwood for the year ended 31 March 2011;
(ii)Prepare the statement of changes in equity for Highwood for the year ended 31 March 2011;
(iii)Prepare the statement of financial position of Highwood as at 31 March 2011.
Note: your answers and workings should be prented to the nearest $1,000; notes to the financial statements are not required.
The following mark allocation is provided as guidance for this question:
(i)11 marks
(ii) 4 marks
(iii)10 marks
(25 marks)
5[P.T.O.
