BU30001 (3FA) – Advanced Financial Accounting

Week 3 - Tutorial

During the year ending 31 March 2023, Adelaide made the following investments:

 1 April 2022: acquired 2 million ordinary shares in Canberra, paying £1.98 per share. At the
date of acquisition all assets and liabilities in Canberra were shown at their fair value.

 1 October 2022: acquired 16 million ordinary shares in Brisbane, paying cash of £1.90 per
share. At the date of acquisition, Adelaide and Brisbane had a market share price of £1.35 and
£1.85 each respectively.

All companies have the same financial year end and the summarised draft financial statements are:

Statements of Profit or Loss for the year ending 31 March 2023

Adelaide Brisbane Canberra

£’000 £’000 £’000
Revenue 175,000 105,600 28,000
Cost of Sales (140,800) (74,250) (17,400)
Gross Profit 34,200 31,350 10,600
Distribution costs (4,800) (3,180) (2,640)
Administrative expenses (8,400) (3,840) (1,420)
Finance costs (400) (150) (60)
Profit before tax 20,600 24,180 6,540
Tax expense (4,900) (5,220) (1,240)
Profit for year 15,700 18,960 5,300

Statements of Financial Position as at 31 March 2023

Adelaide Brisbane Canberra

£’000 £’000 £’000
Non-Current Assets
Property, Plant & Equipment 65,600 48,600 20,500
Investments 35,350 0 0
100,950 48,600 20,500
Current Assets 26,400 7,680 4,240
Total Assets 127,350 56,280 24,740

Equity
Ordinary shares of 50p each 40,000 10,000 0
Ordinary shares of £1 each 0 0 8,000
Share Premium 12,000 0 2,000
Retained earnings 51,350 33,800 10,900
103,350 43,800 20,900

Current Liabilities (24,000) (12,480) (3,840)

Total Equity and Liabilities 127,350 56,280 24,740

The following information is also available:

(i) At the date of acquisition, with the exception of property, the fair values of Brisbane’s
identifiable net assets have been agreed at their carrying values. The property had a fair value

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 BU30001 (3FA) – Advanced Financial Accounting
Week 3 - Tutorial

of £2.4m above its carrying value with a remaining useful life of 10 years. Depreciation is
included in cost of sales.

(ii) Adelaide’s directors have agreed to value the non-controlling interest at the date of acquisition
based on fair value of shares held.

(iii) In the post-acquisition period Adelaide sold goods to Brisbane for £6.4million of which £1.6
million remain unsold at 31 March 2023. Brisbane sold goods to Adelaide for £14.4million, of
which £4.2million remain unsold at 31 March 2023. Adelaide sold the goods at cost plus 25%
and Brisbane sold goods at cost plus 40%.

(iv) Adelaide has a trade payable balance owing to Brisbane of £1.2million as at 31 March 2023.
This agrees with the corresponding trade receivable balance in Brisbane’s books.

(v) The directors have agreed that goodwill has been impaired by £180,000 at 31 March 2023. Any
impairment should be charged to administrative expenses.

(vi) Assume all profits accrue evenly through the year and no dividends have been paid.

Required:

Prepare the Consolidated Statement of Profit or Loss for the year ending 31 March 2023 and
the Consolidated Statement of Financial Position as at that date, for the Adelaide Group.