F1 6.10 Question 3 answer

Question

On 01/07/2019 the Parent purchased 60% of the share capital of the Subsidiary for £500,000. On the acquisition date, the Subsidiary had share capital of £50,000 and retained earnings of £480,000.

During the year, the Subsidiary sold goods that cost it £50,000 to the Parent for £150,000. Of these goods, the Parent still held £120,000 in inventory at the year-end. At the year-end the Parent owed the Subsidiary £150,000 in respect of these goods.

The companies’ statements of financial position for the year ended 30/06/2019 are shown below.

Prepare the consolidated statement of financial position for the year ended 30/06/2020.

Answer

The calculations of the group’s goodwill, inventory, retained earnings and non-controlling interests are as follows:

The consolidated statement of financial position (including calculations) are as below.

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