ACCA F7 December 2013 Q1

Workings ($'000)
1) Investment in Southstar
Goodwill
Consideration transferred
- cash (6,000 / 0.50 x 75% x $1.50) 13,500
- contingent 1,800
Non controlling interest (6,000 / 0.50 x 25% x $1.20) 3,600
18,900
Fair value of identifiable net assets
Share capital 6,000
Retained earnings (12,000 + 2,300 post) 14,300
Fair value adjustments 2,000 (22,300)
Bargain purchase (other income) (3,400)
Dr Investment in Southstar 1,800
Cr Contingent consideration 1,800
Dr Contingent consideration 300
Cr Other income 300
Dr PPE 2,000
Cr Fair value adjustments 2,000
Dr Costs of sales (S) 100
Cr PPE 100
2) Elimination
Dr Revenue (4,000 + 9,000) 13,000
Cr Cost of sales 13,000
Profit earned by S = 9,000 - 4,000 - 1,400 = 3,600
Unrealised profit = 1,500/9,000 x 3,600 = 600
Dr Cost of sales (S) 600
Cr Inventory 600
3) Investment
Total 16,000
Southstar (13,500)
2,500
( - ) loss (200) parent expenses
2,300
Polestar
(a) Consolidated statement of profit or loss for the year ended 30 September 2013
$000
Revenue 110,000 + (66,000 x 6/12) 13,000 w2 130,000
Cost of sales 88,000 + (67,200 x 6/12) + 100 w1 - 13,000 + 600 w2 (109,300)
Gross profit 20,700
Distribution costs (3,000 + (2,000 x 6/12)) (4,000)
Administrative expenses 5,250 + (2,400 x 6/12) 3,400 w1 (3,050)
Loss on equity investments w3 (200)
Other income w1 300
Finance costs (250)
Profit before tax 13,500
Income tax expense 3,500 (1,000 x 6/12) (3,000)
Profit for the year 10,500
Profit for year attributable to:
Equity holders of the parent (bal. fig.) 11,250
Non-controlling interest [(-4,600 x 6/12) - 100 w1 - 600 w2] x 25% (750)
10,500
4) Group retained earnings as at year end
As start of year (only P) 28,500 - 10,000 18,500
Current year group profit 11,250
29,750
5) Non-controlling interest as at year end
At acquisition 3,600
Share of post acquisition (750)
2,850
(b) Consolidated statement of financial position as at 30 September 2013
Assets $000
Non-current assets
Property, plant and equipment 41,000 + 21,000 + 2,000 w1 - 100 w1 63,900
Financial asset: equity investments w3 2,300
66,200
Current assets (16,500 + 4,800 600 w2) 20,700
Total assets 86,900 86,900
Equity and liabilities
Equity attributable to owners of the parent
Equity shares of 50 cents each 30,000
Retained earnings w4 29,750
59,750
Non-controlling interest w5 2,850
Total equity 62,600
Current liabilities
Contingent consideration 1,800 - 300 w1 1,500
Other (15,000 + 7,800) 22,800
Total equity and liabilities 86,900 86,900