- 8 Marks
FR – L2 – Q80 – Business Combinations
Question
PEAK LTD
Statements of financial position at 31 December 20X4
| Peak Ltd GH¢000 | Ridge Ltd GH¢000 | |
|---|---|---|
| Investment in Ridge Ltd (80%) | 100,000 | |
| Sundry assets | 207,500 | 226,600 |
| 307,500 | 226,600 | |
| Share capital | 120,000 | 50,000 |
| Retained earnings | 87,500 | 70,000 |
| Liabilities | 100,000 | 106,600 |
| 307,500 | 226,600 |
Peak Ltd purchased the shares in Ridge Ltd on 30th September 20X4. Ridge Ltd’s retained profit for the year ended 31st December 20X4 was GH¢24,000,000.
Required
Prepare the consolidated statement of financial position at 31 December 20X4.
Answer
PEAK LTD
Consolidated statement of financial position as at 31 December 20X4
| GH¢000 | |
|---|---|
| Assets | |
| Sundry net assets (207,500 + 226,600) | 434,100 |
| Goodwill (W3) | 8,800 |
| 442,900 | |
| Equity and liabilities | |
| Share capital | 120,000 |
| Retained earnings (W5) | 92,300 |
| 212,300 | |
| Non-controlling interest (W4) | 24,000 |
| Sundry liabilities (100,000 + 106,600) | 206,600 |
| 442,900 |
Workings
(1) Group structure
Peak
80%
Ridge
(2) Net assets of Ridge
| Reporting date GH¢000 | Date of acquisition GH¢000 | Post acquisition GH¢000 | |
|---|---|---|---|
| Share capital | 50,000 | 50,000 | |
| Retained earnings | 70,000 | 64,000 | 6,000 |
| 120,000 | 114,000 | 6,000 |
(3) Goodwill
| GH¢000 | |
|---|---|
| Cost | 100,000 |
| Net assets acquired (80% × 114,000) (W2) | (91,200) |
| 8,800 |
(4) Non-controlling interest
20% × 120,000 (W2) = GH¢24,000
(5) Retained earnings
| GH¢000 | |
|---|---|
| Peak | 87,500 |
| Ridge (80% × (70,000 – 64,000) (W2)) | 4,800 |
| 92,300 |
- Uploader: Samuel Duah