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MARS COMPANY LIMITED

Mars Company Limited purchased 75% of the outstanding shares of Venus Company Limited on
January 1, 2016 by issuing 3,600 new shares to Venus Company Limited shareholders and by a
cash payment of Tk. 15,000. Venus retained earnings were Tk. 80,000 at this date and the issued
common shares were Tk. 20,000.
On acquisition date the fair values of all assets of Venus were equal to their book values with the
following exceptions: (a) the market price of land was Tk. 2,500 higher than book value and (b) the
market price of plant and equipment was Tk. 1,500 higher than the book value.
The plant and equipment had a remaining life of 10 years at the date of acquisition. The goodwill
was not depreciated but assessed for possible impairment. Annual impairment assessed by Mars
Company were as follows: 2016 nil, 2017 Tk. 2,300, 2018 nil, 2019 Tk. 2,100 and 2020 Tk. 1,350
Trial balances as at December 31, 2020 were as follows:
Mars Company Venus Company
Dr. Cr. Dr. Cr.
Cash and Receivables 35,000 9,000
Inventory 90,000 35,000
Investment in Venus 105,000 -
Land 80,000 30,000
Plant and Equipment 300,000 50,000
Buildings 162,500 75,000
Accounts Payable 50,000 15,000
Long Term Liabilities 60,000 43,000
Common Shares 250,000 20,000
Retained Earnings 400,000 115,000
Dividends Paid 5,000 4,000
Sales 105,000 35,000
Dividend Income 8,500 7,500
Cost of Goods Sold 72,500 22,500
Depreciation 20,000 7,500
Other Expenses 3,500 2,500 .
873,500 873,500 235,500 235,500
Other Information:
1) Mars shares were being traded for Tk. 25 at the stock exchange on acquisition date.
2) Venus owes Tk. 5,000 which is due to Mars. The amount is included in the receivables of
Mars and in the payables of Venus.
3) During 2019, Mars sales to Venus was Tk. 9,000 and Venus sold goods to Mars for Tk. 6,500.
None of the goods are in the ending inventory of either company.

Required:
Prepare in good format and in accordance with all relevant IFRS recommendations the
consolidated financial statements of Mars Company Limited.
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WORKINGS:

STEP I

Acquisition Differential 100% R/E [4] I/S [1] B/S

Shares [3,600 X 25] 90,000

Cash 15,000
Consideration [75%] 105,000
Implied market value [100%] 140,000
Less: C/Stock 20,000
R/Earnings 80,000 100,000
Acquisition Differential 40,000
Allocated to:
Land 2,500 - - 2,500
Plant & Equipment [10 years] 1,500 600 150 750
Goodwill 36,000 4,400 1,350 30,250

Total allocation 40,000 5,000 1,500 33,500

STEP II

Inter-co Balance Elimination

Dr. Cr.
a) Inter-company dividends:
Dividend income 3,000
Non-controlling Interest 1,000
Dividends 4,000

b) Inter-company balance:
Accounts payable 5,000
Accounts receivable 5,000

c) Inter-company sale:
Sales 15,500
Cost of goods sold 15,500
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STEP III

Consolidated Beginning Retained Earnings

Beginning Retained Earnings – Mars 400,000

Pick up from Venus:
Beginning Retained Earnings – Venus 115,000
Less: Acquisition date R/E – Venus 80,000
35,000
Less: Depreciation & impairments [Step I] 5,000

Adjusted Beginning R/Earnings - Venus 30,000

75% thereof 22,500
Consolidated Beginning Retained Earnings 422,500

STEP IV

(a) Non-controlling Interest – Income Statement

Net Profit – Venus 10,000

Less: Depreciation & Impairments [Step I] 1,500
Adjusted Net Profit – Venus 8,500
25% thereof 2,125

(b) Non-controlling Interest – Balance Sheet

Common Stock - year end 20,000

Retained Earnings – year end:
R/Earnings – beg of year 115,000
Add: Net Income 10,000
125,000
Less: Dividends paid 4,000 121,000
Net assets/worth of Venus – year end 141,000
Add: Acquisition differential on balance sheet [Step I] 33,500
174,500
25% thereof 43,625
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SOLUTION:

Mars Company Limited

Consolidated Income Statement
For the year ending December 31, 2020

Sales [M+V - 15,500 step II] 124,500

Dividend income [M+V – 3,000 step II] 13,000
Total Revenue 137,500
Cost of Goods Sold [M+V – 15,500 step II] 79,500
Depreciation [M+V + 1,500 step I] 29,000
Other Expense [M+V] 6,000
Total Expense 114,500
Consolidated Net Profit 23,000

Attributed to Non-controlling Interest [Step IV] 2,125

Attributed to Mars Company Limited [balance] 20,875
23,000

Mars Company Limited

Consolidated Retained Earnings Statement
For the year ending December 31, 2020

Beginning Consolidated Retained Earnings [Step III] 422,500

Add: Consolidated Net Profit – Mars’s share 20,875
443,375
Less: Dividends paid – Mars 5,000
Ending Consolidated Retained Earnings 438,375
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Mars Company Limited

Consolidated Balance Sheet
As at December 31, 2020
Assets
Cash and receivables [M+V – 5,000 step-II] 39,000
Inventory [M+V] 125,000
Land [M+V + 2,500 step-I] 112,500
Plant & Equipment [M+V + 750 step-I] 350,750
Buildings [M+V] 237,500
Goodwill [Step-I] 30,250
Total Assets 895,000
Liabilities and Owners’ Equity
Accounts Payable [M+V – 5,000 step-II] 60,000
Long Term Liabilities [M+V] 103,000
Total Liabilities 163,000
Common Stock [Mars only] 250,000
Consolidated Retained Earnings 438,375
Non-controlling Interest [Step IV] 43,625
Total Liabilities & Owners’ Equity 895,000

Additional Optional Calculation:

It is a good idea to maintain a continuity schedule for all the changes in NCI on balance sheet.

Non-controlling Interest Continuity Schedule

Implied market value of Venus – on acquisition date [Step I] 140,000

NCI on acquisition date [25% X 140,000] 35,000
Add: NCI – Beginning R/E [25% X 30,000 step III] 7,500
Add: NCI – Net Income [25% X 8,500 step IV] 2,125
44,625
Less: Dividends paid to NCI [25% X 4,000] 1,000
43,625