TEST 2

The following are the financial statements relating to Black, a limited liability company, and
its subsidiary company Bury.

Additional information
(a) Black purchased its $1 ordinary shares in Bury on 1 November 20X0. At that date the
balance on Bury's retained earnings was $2.1 million. Price of Bury share at the date of
acquisition was $1.4 per share.
(b) During the year ended 31 October 20X5 Black sold goods which originally cost $10 million
to Bury. Black invoiced Bury at cost plus 20%. Bury still has 50% of these goods in inventory
at 31 October 20X5.
(c) Bury owed Black $1.5 million at 31 October 20X5 for some of the goods Black supplied
during the year.
Required: Prepare the following financial statements for Black.
(i) The consolidated statement of profit or loss for the year ended 31 October 20X5.
(ii) The consolidated statement of financial position as at 31 October 20X5.
TEST 2 – SOLUTION – NCI @ FAIR VALUE
Solution: NCI@fair value
*Consolidated SOFP
Non-current assets
PPE (W10) 150000
GW 1500 151500
Current assets
Inventory, at cost 16250
Trade receivable and dividend
receivable 19420
Bank 6070 41740
Total assets 193240
Equity
Share capital 100000
Share premium 0
RE (W5) 38226
NCI (W4) 15054 153280
Payables 9960
Dividend 30000
Total equity and liabilities 193240
*Consolidated SOPL
Revenue 328000
COS -181000
Gross profit 147000
Distribution cost -22000
Administrative expenses -68000
GW Impairment 0
Profit from operations 57000
Finance costs 0
Profit before tax 57000
Tax -18250
Profit for the year 38750

Profit attribution:
Owners of P 34250
NCI of S (W12) 4500
38750
(W1) Group structure: P -----------------------------------> S
70%

(W2) Net asset

At reporting date At acquisition Post-acquisition
Share capital 30000 30000 0
RE 10280 2100 8180
PPE fair value uplift 0 0 0
Additional
depreciaion 0 0
Less: PURP (W6) 0 0

40280 32100 8180

(W3)
GW
Consideration 21000
NCI at acquisition 12600
Less: FV of NA of Satago at acquisition -32100
GW @ acquisition 1500
Less: GW
impairment 0
GW 1500
(W4)
NCI
NCI at acquisition 12600
NCI share of post-
acq 2454
Less: GW impairment allocated to NCI 0
NCI 15054

(W5) Group RE
P's RE 33500
PURP -1000
P's share in S post-acq 5726
Less: GW Impairment allocated to Group) 0
Consol
RE 38226
P -------sold----------->
(W6) PURP S
Sales 12,000
Markup 20%
Profit 2000
PURP 50% 1000

(W7) Consolidation schedule for SOPL

P S Adj Consol
-
Revenue 245000 95000 12,000 328000
COS Per Qs -140000 -52000
(adjustment to COS =
Adjustment for internal sales 11,000 Internal sales - PURP)
-
Additional depreciation 0 181000
Distribution cost -12000 -10000 -22000
Administrative cost -55000 -13000 -68000
GW impairment 0
Finance cost 0 0 0
Tax -13250 -5000 -18250
Net profit 24750 15000 38750
Note: dividend income from S in the P/L of P will be removed in consolidated SOPL

(W8) Attribution profit to NCI

Net profit of S 15000
Adjustment for
Additional depreciation 0
(adjusted for PURP in case S sell
PURP 0 0 to P)
15000
NCI share in adjusted net profit 4500
GW impairment in the year allocated to NCI 0
PAT allocated to NCI 4500
TEST 2 – SOLUTION – NCI @ Proportionate share of the FV of net asset of the
subsidiary
*Consolidated SOFP
Non-current assets
PPE (W10) 150000
GW 0 150000
Current assets
Inventory, at cost 16250
Trade receivable and dividend
receivable 19420
Bank 6070 41740
Total assets 191740
Equity
Share capital 100000
Share premium 0
RE (W5) 39696
NCI (W4) 12084 151780
Payables 9960
Dividend 30000
Total equity and liabilities 191740.0
*Consolidated SOPL
Revenue 328000
COS -181000
Gross profit 147000
Distribution cost -22000
Administrative expenses -68000
GW Impairment 0
Profit from operations 57000
Finance costs 0
Profit before tax 57000
Tax -18250
Profit for the year 38750

Profit attribution:
Owners of P 34250
NCI of S (W12) 4500
38750
(W1) Group structure: P -----------------------------------> S
70%

(W2) Net asset

At reporting date At acquisition Post-acquisition
Share capital 30000 30000 0
RE 10280 2100 8180
PPE fair value uplift 0 0 0
Additional
depreciaion 0 0
Less: PURP (W6) 0 0

40280 32100 8180

(W3)
GW
Consideration 21000
NCI at acquisition 9630
Less: FV of NA of Satago at acquisition -32100
GW/Gains on bargain purchase @
acquisition -1470
Less: GW
impairment 0
GW / Gains on bargain purchase -1470
(W4)
NCI
NCI at acquisition 9630
NCI share of post-
acq 2454
Less: GW impairment allocated to NCI 0
NCI 12084

(W5) Group RE
P's RE 33500
PURP -1000 (from sales from the Parent to subsidiary)
P's share in S post-acq 5726
Gain from bargan purchase 1470
Consol
RE 39696
P -------sold----------->
(W6) PURP S
Sales 12,000
Markup 20%
Profit 2000.0
PURP 50% 1000.0

(W11) Consolidation schedule for SOPL

P S Adj Consol
-
Revenue 245000 95000 12,000 328000
COS Per Qs -140000 -52000
(adjustment to COS =
Adjustment for internal sales 11,000 Internal sales - PURP)
-
Additional depreciation 0 181000
Distribution cost -12000 -10000 -22000
Administrative cost -55000 -13000 -68000
GW impairment 0
Finance cost 0 0 0
Tax -13250 -5000 -18250
Net profit 24750 15000 38750
Note: dividend income from S in the P/L of P will be removed in consolidated SOPL

(W12) Attribution profit to NCI

Net profit of S 15000
Adjustment for
Additional depreciation 0
(adjusted for PURP in case S sell to
PURP 0 0 P)
15000
NCI share in adjusted net profit 4500
GW impairment in the year allocated to NCI 0
PAT allocated to NCI 4500