FR – L2 – Q78 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Melodious Ltd group as at 31 December 20X4.

Question

The following are the summarised statements of financial position of a group of companies as at 31 December 20X4.

	Melodious Ltd GH₵	Verse Ltd GH₵
Assets
Non-current assets
Property, plant and equipment	105,000	65,000
Investment	85,000
Current assets	220,000	55,000
Total Assets	410,000	120,000
Equity and liabilities
Equity
Share capital	100,000	50,000
Retained earnings	155,000	49,000
	255,000	99,000
Current liabilities	155,000	21,000
Total Equity and Liabilities	410,000	120,000

Melodious Ltd purchased 80% of Verse Ltd’s shares on 1 January 20X4 when there was a credit balance on that company’s retained earnings of GH₵20,000.
Required
Prepare the Melodious Ltd group consolidated statement of financial position as at 31 December 20X4.

Answer

Melodious Ltd
Consolidated statement of financial position as at 31 December 20X4

Assets	GH₵
Non-current assets
Property, plant and equipment	170,000
Goodwill	29,000
Current assets	275,000
Total Assets	474,000

Equity and liabilities	GH₵
Shareholders’ equity
Share capital	100,000
Retained earnings (W5)	178,200
	278,200
Non-controlling interest (W4)	19,800
Current liabilities	176,000
Total Equity and Liabilities	474,000

Workings
(1) Group structure
Melodious
80%
Verse

(2) Net assets of Verse

	Reporting date GH₵	Date of acquisition GH₵	Post acquisition GH₵
Share capital	50,000	50,000
Retained earnings	49,000	20,000	29,000
	99,000	70,000

(3) Goodwill

	GH₵
Cost of shares	85,000
Net assets acquired (80% × 70,000) (W2)	(56,000)
	29,000

(4) Non-controlling interest
20% × 99,000 (W2) = GH₵19,800

(5) Retained earnings

	GH₵
Melodious	155,000
Verse (80% × 29,000 (W2))	23,200
	178,200

Tags: Business Combinations, Consolidated Financial Statements, Goodwill, Group Structure, Non-controlling Interest, Retained Earnings
Level: Level 2

Topic: Business Combinations

Uploader: Samuel Duah