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On 1 October 20X0, Paladin secured a majority equity shareholding in Saracen on the following terms. 

An immediate payment of $4 per share on 1 October 20X0; and a further amount deferred until 1 October 20X1 of $5.4 million.

The immediate payment has been recorded in Paladin's financial statements, but the deferred payment has not been recorded. Paladin's cost of capital is 8% per annum, giving the deferred payment a current cost at 1 October 20X0 of $5 million.

On 1 February 20X1, Paladin also acquired 25% of the equity shares of Augusta paying $10 million in cash.

The summarized statements of financial position of the three companies at 30 September 20X1 are:

 

 

Paladin

 

Saracen

 

Augusta

Assets

 

$'000

 

$'000

 

$'000

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

40,000

 

31,000

 

30,000

Intangible assets

 

7,500

 

 

 

 

Investments – Saracen (8 million shares at $4 each)

 

32,000

 

 

 

 

                      – Augusta

 

   10,000

 

       nil

 

        nil

 

 

89,500

 

31,000

 

30,000

Current assets

 

 

 

 

 

 

Inventory

 

11,200

 

8,400

 

10,000

Trade receivables

 

7,400

 

5,300

 

5,000

Bank

 

     3,400

 

        nil

 

   2,000

Total assets

 

 111,500

 

 44,700

 

 47,000

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Equity shares of $1 each

 

50,000

 

10,000

 

10,000

Retained earnings – at 1 October 20X0

 

25,700

 

12,000

 

31,800

                            – for year ended 30 September 20X1

 

    9,200

 

   6,000

 

   1,200

 

 

84,900

 

28,000

 

43,000

Non-current liabilities

 

 

 

 

 

 

Deferred tax

 

15,000

 

8,000

 

1,000

Current liabilities

 

 

 

 

 

 

Bank   

 

nil

 

2,500

 

nil

Trade payables   

 

   11,600

 

   6,200

 

   3,000

Total equity and liabilities

 

 111,500

 

 44,700

 

 47,000

The following information is relevant:

  1. Paladin's policy is to value the non-controlling interest at fair value at the date of acquisition. The directors of Paladin considered the fair value of the non-controlling interest in Saracen to be $7 million.
  2. At the date of acquisition, the fair values of Saracen's property, plant and equipment was equal to its carrying amount with the exception of Saracen's plant which had a fair value of $4 million above its carrying amount. At that date the plant had a remaining life of four years. Saracen uses straight-line depreciation for plant assuming a nil residual value.

Also at the date of acquisition, Paladin valued Saracen's customer relationships as a customer base intangible asset at fair value of $3 million. Saracen has not accounted for this asset. Trading relationships with Saracen's customers last on average for six years.

  1. At 30 September 20X1, Saracen's inventory included goods bought from Paladin (at cost to Saracen) of  $2.6 million. Paladin had marked up these goods by 30% on cost. Paladin's agreed current account balance owed by Saracen at 30 September 20X1 was $1.3 million.
  2. Impairment tests were carried out on 30 September 20X1 which concluded that consolidated goodwill was not impaired, but, due to disappointing earnings, the value of the investment in Augusta was impaired by $2.5 million.
  3. Assume all profits accrue evenly through the year.

Requirements:

Prepare the consolidated statement of financial position for Paladin as at 30 September 20X1.

Marks: 20

Answers submitted

Created by Ref Marking Action
Runa Akter's picture
Runa Akter
11/10/2020 - 18:37

10112
20
Runa Akter's picture
Runa Akter
11/02/2020 - 20:44

9008
20
Runa Akter's picture
Runa Akter
11/02/2020 - 20:42

9996
20
Kamrul Hasan's picture
Kamrul Hasan
09/06/2020 - 19:32

9642
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
09/04/2020 - 21:35

9616
20
Kamrul Hasan's picture
Kamrul Hasan
08/31/2020 - 12:50

9560
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
08/20/2020 - 17:29

9452
20
Kamrul Hasan's picture
Kamrul Hasan
08/19/2020 - 09:24

9426
20
Kamrul Hasan's picture
Kamrul Hasan
08/15/2020 - 09:21

9390
20
Kamrul Hasan's picture
Kamrul Hasan
08/12/2020 - 18:00

9356
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
08/12/2020 - 18:39

9358
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
08/11/2020 - 17:38

9346
20
mohammad merazul islam's picture
mohammad merazu...
07/05/2020 - 02:21

9282
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
07/05/2020 - 20:36

9284
20
Md. Sojib Khan's picture
Md. Sojib Khan
06/29/2020 - 13:01

9258
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
03/04/2020 - 04:41

9038
20
Kamrul Hasan's picture
Kamrul Hasan
03/03/2020 - 16:29

9010
20