1.

The following are the summarised statements of financial position as at 31 December 2011:
P S
$000 $000 $000 $000
Non-current assets
Property, plant and equipment 1,000 500
Investments 450 0
1,450 500
Current assets
Inventory 300 250
Trade receivables 200 150
Bank 300 200
800 600
Total assets 2,250 1,100
Equity and liabilities
Equity
Share capital ($1 each) 500 200
Retained earnings 650 400
1,150 600
Non-current liabilities
Loan notes 100 50
Current liabilities
Trade payables 1,000 450
Total equity and liabilities 2,250 1,100
The following notes are relevant:
1. P acquired 75% of S two years ago for $450,000 cash. At the date of acquisition S retained earnings
were $100,000.
2. The directors have deemed fair value of non-controlling interest at acquisition to be $150,000
Required:
Prepare the consolidated statement of financial position for P group as at 31 December 2011.

Note: PUP: Provision for Unrealised Profit
2. P sells $100,000 worth of goods to S (an 80% subsidiary) at cost plus 25% (25% mark-up). S had not
sold any of the goods outside the group by the end of the year.
Required:
Calculate the PUP and show the double entry for this transaction.

3. In the post acquisition period Sallys sales to Polly were $50 million on which Sally had made a margin
of 5% on these sales. Of these goods, $7 million (at selling price to Polly) were still in the inventory of
Polly at its year-end of 30 September 2011. Polly holds a controlling interest of 70% in Sally.
Required:
Calculate the PUP

4. During the year Star, a 75% subsidiary, sold goods to Peanut, its parent, for $2.5million. Star adds a
20% mark-up on cost to all its sales. Goods with a transfer price of $900,000 were included in Peanuts
inventory at its year-end of 31 December 2011.
Required:
Calculate the PUP

5. In the post acquisition period Prague, the parent, sold goods to Sicily, its subsidiary, at a price of $2
million. These goods had cost Prague $1.5 million. A quarter of these goods were still in the inventory of
Sicily at its year-end of 31 October 2011.
Required:
Calculate the PUP

6. S has the following equity balances:
At 1 Jan 2011 At 31 Dec 2011
$000 $000
Equity ($1) share capital 300,000 300,000
Share premium 150,000 150,000
Retained earnings 100,000 160,000
550,000 610,000
P acquired 80% of the equity share capital of S on 1 January 2011 for an agreed cash amount of $600
million.
At the date of acquisition the carrying values of Ss assets were approximately equal to their book values
with the exception of some land that has a market (fair) value of $50 million but it is currently carried at
$40 million in Ss financial statements.
The fair value of the non-controlling interest at acquisition is $200 million.
Required:
Calculate the goodwill arising on acquisition of S

7. On 1 March 2011 Placid acquired 80% of Salids equity shares in a share exchange of 3 shares in Placid
for every two shares in Salid. Salid has a total issued share capital of $8,000 in $1 equity shares. The
market price of Placids shares at the date of acquisition was $3 per share.
Required:
Calculate the cost of investment in Salid to be used in calculating goodwill.

8. On 1 September 2011 P acquired 6 million shares of a total of 8 million shares in S for an immediate
cash payment of $2.50 per share acquired and through a share exchange of one share in P for every two
shares in S. The market price of Ps shares at the date of acquisition was $8 per share.
Required:
Calculate the cost of investment in S to be used in calculating goodwill.

9. Palm acquired 80% of Swift on 1 October 2011 for $10 million. The following statements of
comprehensive income are available for both companies for the year ended 31 December 2011
Palm Swift
$000 $000
Sales 110,000 80,000
Cost of sales (50,000) (30,000)
Gross profit 60,000 50,000
Administrative expenses (20,000) (35,000)
Profit before tax 40,000 15,000
Income tax expense (10,000) (5,000)
Profit for the year 30,000 10,000
The following notes are relevant:
1. During the post-acquisition period Swift sold $5 million of goods to Palm at a mark-up of 25% on cost.
A quarter of these goods are in inventory at the year-end.
2. Assume all profits accrue evenly over the year.
Required:
Prepare the consolidated statement of comprehensive income for the year ended 31 December 2011.
10. Pacify acquired 60% of the ordinary share capital of Scholar on 1 October 2011. Revenue for the two
companies for the year ended 30 November 2011 was $2,200,000 and $600,000 respectively. Assume
profits accrue evenly over the year.
Required:
Calculate group revenue for inclusion in the consolidated statement of comprehensive income for the
year ended 30 November 2011