Unrealised Profit

FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

Question

On 31 December Year 5, an associate, Anita Healthcare Ltd, holds inventory which is valued at GH¢32,000 purchased during the year from its investor Pamela Wellness Ltd. At the same date, Pamela Wellness Ltd holds inventory purchased from a subsidiary, Sophie Pharmaceuticals Ltd, which is valued at GH¢80,000.
Sales from Pamela Wellness Ltd to Anita Healthcare Ltd and from Sophie Pharmaceuticals Ltd to Pamela Wellness Ltd are priced at a mark-up of one-quarter on cost.
Pamela Wellness Ltd owns 30% of Anita Healthcare Ltd and 60% of Sophie Pharmaceuticals Ltd.

Required
Set out the adjustments necessary to reflect any unrealised profit in the above in the consolidated statement of financial position.

Answer

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Tags: Associates, Consolidation, Financial Statements, IAS 2, IAS 28, IFRS 3, Inventory, Subsidiaries, Unrealised Profit
Level: Level 2

Topic: Business Combinations (IFRS 3)

FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

Question

Portico Ltd acquired 30% of the equity shares in Armand Ltd (which satisfies the definition of associate) during Year 1 at a cost of GH₵350,000 when the fair value of the net assets of Armand Ltd was GH₵250,000. Since that time, the investment in Armand Ltd has been impaired by GH₵4,000.
On 31 December Year 5, the net assets of Armand Ltd were GH₵400,000. Since the date of acquisition, there have been no changes in the share capital of Armand Ltd or in any reserves other than retained earnings.
In the year to 31 December Year 5, the profits of Armand Ltd after tax were GH₵50,000.

Required
Show how the holding in Armand Ltd would be reflected in the Year 5 consolidated statement of financial position and consolidated statement of profit or loss.

Answer

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Tags: Associates, Consolidated Financial Statements, Equity Accounting, Financial Position, Impairment, Investment in Associate, Profit or Loss, Unrealised Profit
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)

FR – L2 – Q88 – Business Combinations

Prepare Haven Ltd's consolidated statement of profit or loss and retained earnings movement for 20X4, adjusting for intercompany sales and dividends.

Question

Haven Ltd
The following are the statement of profit or loss for the year ended 31 December 20X4 of Haven Ltd and its subsidiary Seren Ltd.

	Haven Ltd GH¢’000	Seren Ltd GH¢’000
Revenue	1,120	390
Cost of sales	(610)	(220)
Gross profit	510	170
Distribution costs	(50)	(40)
Administration costs	(55)	(45)
Operating profit	405	85
Investment income	20	4
Finance costs	(18)	(4)
Profit before tax	407	85
Income tax expense	(140)	(25)
Profit for the year	267	60
Retained profit brought forward	100	45
Profit for year	267	60
Dividends paid and proposed	(50)	(20)
Retained profit carried forward	317	85

The following information is relevant.
(1) Haven Ltd acquired 75% of Seren Ltd six years ago when Seren Ltd’s retained earnings were GH¢9,000.
(2) Haven Ltd made sales to Seren Ltd totalling GH¢100,000 in the year. At the year end the statement of financial position of Seren Ltd included inventory purchased from Haven Ltd. Haven Ltd had taken a profit of GH¢3,000 on this inventory.
(3) Haven Ltd’s investment income includes GH¢15,000 being its share of Seren Ltd’s dividends.

Required
Prepare a consolidated statement of profit or loss and a working showing the movement on consolidated retained profit for the year ended 31 December 20X4.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Dividends, Intercompany Transactions, Inventory, Non-controlling Interest, Profit or Loss, Retained Earnings, Unrealised Profit
Level: Level 2

Topic: Business Combinations (IFRS 3)

Tag (SQ): Unrealised Profit

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FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

FR – L2 – Q88 – Business Combinations

Prepare Haven Ltd's consolidated statement of profit or loss and retained earnings movement for 20X4, adjusting for intercompany sales and dividends.

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FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

You're reporting an error for "FR – L2 – Q95 – Business Combinations"

FR – L2 – Q94 – Associates and Joint Ventures

Prepare entries for Portico Ltd's 30% holding in Armand Ltd in the Year 5 consolidated financial statements, including financial position and profit or loss.

You're reporting an error for "FR – L2 – Q94 – Associates and Joint Ventures"

FR – L2 – Q88 – Business Combinations

Prepare Haven Ltd's consolidated statement of profit or loss and retained earnings movement for 20X4, adjusting for intercompany sales and dividends.

You're reporting an error for "FR – L2 – Q88 – Business Combinations"

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