- 12 Marks
FR – L2 – Q84 – Business Combinations
Prepare Prime Ltd's consolidated statement of financial position as at 31 Dec 20X4, considering acquisition of Nexus Ltd, fair value adjustments, and unrealised profits.
Question
On 1 July 20X1 Prime Ltd acquired 128,000 of Nexus Ltd’s 160,000 shares. The following statements of financial position have been prepared as at 31 December 20X4.
| Prime Ltd GH¢000 | Nexus Ltd GH¢000 | |
|---|---|---|
| Property, plant and equipment | 152,000 | 129,600 |
| Investment in Nexus Ltd | 203,000 | – |
| Inventory at cost | 112,000 | 74,400 |
| Receivables | 104,000 | 84,000 |
| Bank balance | 41,000 | 8,000 |
| Total | 612,000 | 296,000 |
| Prime Ltd GH¢000 | Nexus Ltd GH¢000 | |
|---|---|---|
| Share capital | 100,000 | 160,000 |
| Retained earnings | 460,000 | 112,000 |
| Payables | 52,000 | 24,000 |
| Total | 612,000 | 296,000 |
The following information is available.
(1) At 1 July 20X1 Nexus Ltd had a debit balance of GH¢11 million on retained earnings.
(2) Property, plant and equipment of Nexus Ltd included land at a cost of GH¢72 million. This land had a fair value of GH¢100,000 at the date of acquisition.
(3) The inventory of Nexus Ltd includes goods purchased from Prime Ltd for GH¢16 million. Prime Ltd invoiced those goods at cost plus 25%.
Required
Prepare the consolidated statement of financial position of Prime Ltd as at 31 December 20X4.
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