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  • 12 Marks

FR – L2 – Q83 – Business Combinations

Prepare Tough Ltd's consolidated statement of financial position as at 31 Dec 20X4, adjusting for intra-group asset transfer and fair value.

On 31 December 20X0, Tough Ltd acquired 60% of the ordinary share capital of Gentle Ltd for GH¢110 million. The following statements of financial position have been prepared as at 31 December 20X4. Statements of Financial Position as at 31 December 20X4

Tough Ltd Gentle Ltd
GH¢’000 GH¢’000
Assets
Non-current assets
Property, plant and equipment 225,000 175,000
Investments in Gentle Ltd 110,000 —
Current assets 271,000 157,000
606,000 332,000
Equity and liabilities
Capital and reserves
Share capital 115,000 110,000
Retained earnings 260,000 80,000
375,000 190,000
Current liabilities 231,000 142,000
606,000 332,000

During the year to 31 December 20X4, Tough Ltd sold a tangible asset to Gentle Ltd for GH¢50 million. The asset was originally purchased in the year to 31 December 20X1 at a cost of GH¢100 million and had a useful economic life of five years. Gentle Ltd’s depreciation policy is 25% per annum based on cost. Both companies charge a full year’s depreciation in the year of acquisition and none in the year of disposal. Required Prepare the consolidated statement of financial position of Tough Ltd and its subsidiary as at 31 December 20X4.

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  • 12 Marks

FR – L2 – Q82 – Business Combinations

Prepare Furry Ltd's consolidated statement of financial position as at 31 Dec 20X4, adjusting for intra-group inventory and cash in transit.

The summarised statements of financial position of Furry Ltd and Webber Ltd as at 31 December 20X4 were as follows.

Assets Furry Ltd GH₵000 Webber Ltd GH₵000
Non-current assets
Property, plant and equipment 120,000 60,000
Investments 55,000 —
Current assets
Cash 11,000 4,000
Investments — 3,000
Trade receivables 72,600 19,100
Current account – Furry Ltd — 3,200
Inventory 17,000 11,000
Total 275,600 100,300

Equity and liabilities Furry Ltd GH₵000 Webber Ltd GH₵000
Capital and reserves
Share capital 120,000 60,000
Capital reserve 23,000 16,000
Retained earnings 91,900 7,300
Current liabilities 38,000 17,000
Total 275,600 100,300

The following information is relevant:
(1) On 31 December 20X1, Furry Ltd acquired 48,000 shares in Webber Ltd for GH₵55,000,000 cash. Webber Ltd has 60,000 shares in total.
(2) The inventory of Furry Ltd includes GH₵4,000,000 goods from Webber Ltd invoiced to Furry Ltd at cost plus 25%.
(3) The difference on the current account balances is due to cash in transit.
(4) The balance on Webber Ltd’s retained earnings was GH₵2,300,000 at the date of acquisition. There has been no movement in the balance on Webber Ltd’s capital reserve since the date of acquisition.

Required:
Prepare the consolidated statement of financial position of Furry Ltd and its subsidiary Webber Ltd as at 31 December 20X4.

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  • 12 Marks

FR – L2 – Q81 – Business Combinations

Prepare PrimeCare Ltd's consolidated statement of financial position as at 31 December 20X4, including Frost Ltd, with adjustments for dividends and cash in transit.

PRIME CARE LTD
The following are the draft statements of financial position of PrimeCare Ltd and its subsidiary Frost Ltd as at 31 December 20X4.

PrimeCare Ltd GH¢000 Frost Ltd GH¢000
Assets
Non-current assets
Property, plant and equipment 100,000 68,000
Investments 68,000
Current assets
Cash 11,000 2,000
Trade receivables 72,600 19,100
Frost Ltd current account 3,200
Inventory 17,000 11,000
271,800 100,100
Equity and liabilities
Shareholders’ equity
Share capital 120,000 60,000
Retained earnings 91,900 16,000
Capital reserve 23,000 7,000
Current liabilities
PrimeCare Ltd current account 3,200
Trade payables 33,900 12,900
Proposed dividend 3,000 1,000
271,800 100,100

Notes
(1) Frost Ltd has 50,000 shares in issue. PrimeCare Ltd acquired 45,000 of these on 1 January 20X1 for a cost of GH¢65,000,000 when the balances on Frost Ltd’s reserves were:

  • Capital reserve: 20,000
  • Retained earnings: 10,000

(2) PrimeCare Ltd declared a dividend of GH¢3,000,000 before the year end and Frost Ltd declared one of GH¢2,000,000. These transactions have been approved by the shareholders but have not been accounted for.

(3) The current account difference is due to cash in transit.

Required
Prepare the consolidated statement of financial position as at 31 December 20X4 of PrimeCare Ltd.

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  • 8 Marks

FR – L2 – Q80 – Business Combinations

Prepare Peak Ltd's consolidated statement of financial position as at 31 Dec 20X4 after acquiring 80% of Ridge Ltd.

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.

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  • 6 Marks

FR – L2 – Q79 – Business Combinations

Prepare Peak Ltd's consolidated statement of financial position as at 31 Dec 20X4, incorporating 60% acquisition of Riser Ltd.

On 31 December 20X1, Peak Ltd acquired 60% of Riser for GH₵140,000, at that date Riser Ltd had a retained earnings balance of GH₵50,000. The following statements of financial position have been prepared as at 31 December 20X4.

Section Content
Question Title FR – L2 – Q79 – Business Combinations
Level LEVEL 2
Professional Bodies Institute of Chartered Accountants, Ghana (ICAG)
Programs PROFESSIONAL PROGRAM
Subjects Financial Reporting
Topics Business Combinations (IFRS 3)
Total Marks 6
Question Tags Consolidated Financial Statements, Goodwill, Non-Controlling Interest, Net Assets, Acquisition, Retained Earnings, Share Capital, Current Liabilities, Financial Position, IFRS 3
Question Short Summary Prepare Peak Ltd’s consolidated statement of financial position as at 31 Dec 20X4, incorporating 60% acquisition of Riser Ltd.
Preamble On 31 December 20X1, Peak Ltd acquired 60% of Riser for GH₵140,000, at that date Riser Ltd had a retained earnings balance of GH₵50,000. The following statements of financial position have been prepared as at 31 December 20X4.
Financial Statements

Peak Ltd Riser Ltd
Assets
Non-current assets
Property, plant and equipment 240,000 180,000
Investment in Riser Ltd 140,000
Current assets 250,000 196,000
630,000 376,000
Equity
Share capital 225,000 139,000
Retained earnings 180,000 80,000
405,000 219,000
Current liabilities 225,000 157,000
630,000 376,000
Requirement Prepare the consolidated statement of financial position of Peak Ltd and its subsidiary as at 31 December 20X4.

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  • 6 Marks

FR – L2 – Q78 – Consolidated Financial Statements

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

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.

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  • 8 Marks

FR – L2 – Q77 – Consolidated Financial Statements

Prepare consolidated statement of financial position for Apex Ltd and its subsidiary Nexus Ltd as at 31 Dec 20X4.

Statements of financial position at 31 December 20X4

Nexis Ltd Vion Ltd
GH¢ GH¢
Investment in Vion Ltd 60,000
Sundry assets 247,500 226,600
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

Nexis Ltd bought 80% of Vion Ltd when the balance on Vion Ltd’s retained profit was GH¢50,000.
Required
Prepare the consolidated statement of financial position at 31 December 20X4.

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  • 10 Marks

FR – L2 – Q76 – Business Combinations

Prepare Peak Ltd's consolidated statement of financial position as at 31 Dec 20X4 after acquiring 75% of Ridge Ltd.

Peak Ltd
Statements of financial position at 31 December 20X4

Peak Ltd Ridge Ltd
Assets GH₵000 GH₵000
Non-current assets
Property, plant and equipment 35,000 20,000
Investment in Ridge Ltd 12,000
Current assets 16,000 14,000
Total assets 63,000 34,000
Equity and liabilities
Capital and reserves
Share capital 10,000 4,000
Retained earnings 13,000 12,000
23,000 16,000
Non-current liabilities
8% Debenture loans 20,000 9,000
Current liabilities 20,000 9,000
Total equity and liabilities 63,000 34,000

On 1 January 20X2, Peak Ltd acquired 75% of Ridge Ltd for GH₵12,000,000. At that date, the balance on Ridge Ltd’s retained earnings was GH₵8,000,000.

Required:
Prepare the consolidated statement of financial position of Peak Ltd as at 31 December 20X4.

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