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Conso olidated Acco d ounts AL2011 A Sugges sted So olution n

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AL2011IQ2 Suggested Solution VERSION 1 - Based on ORIGINAL HKAS: If pre-acquisition dividend income must be deducted from the cost of investment at company level i.e. in holdings company account (in addition to the consolidated Accounts.) (a) (1)
Cost of control $ Sunny Ltd Investment in Windy Ltd Windy Ltd (80% pre-acq equity) 1 218 000 Ordinary shares Share premium Retained profit (269 000 - 20 000) x 80% Revaluation reserve (W1) Goodwill (on consolidation) 1 218 000 W1: (350000-400000*90%^3)*80% Goodwill $ Cosf of Control 108 080 Income statement: impairment loss Balance c/d 108 080 $ Investment in Windy Ltd Add: Dividend Recevied Cash paid 1 218 000 16 000 1 234 000 $ 30 000 78 080 108 080 800 000 64 000 199 200 46 720 108 080 1 218 000 $

(2)
Sunny Ltd Statement of comprehensive income for the year ended 31 December 2010 $ Turnover (1994000-840000+180000) Cost of sales (897000-425000+180000-15000) Gross Profit Other income (180000-60000) Selling and Administration (165000-72000) Administrative expenses (375840-110000-5840-30000) Profit before tax Taxation (81000-35000) Profit after tax 1 334 000 (637 000) 697 000 120 000 (93 000) (230 000) 494 000 (46 000) 448 000

Facebook: Aaronlee.edu@gmail.com Sunny Ltd Statement of financial position as at 31 December 2010 Non-current assets Property, plant and equipment, net (3293560-1421000-58400+5840) Investment in Windy Ltd (w) $ 1 820 000 1 218 000 3 038 000 Current Assets Inventories (216500-110000+15000) Trade receivables (178500-123000+24000) Cash at bank (303000-101000-6000) 121 500 79 500 196 000 397 000 TOTAL ASSETS Current Liabilities Trade payables (342000-170000+18000) Tax payable (77000-30000) 190 000 47 000 237 000 Equity Ordinary shares of $2 each Share Premium Retained Profit (w) 2 100 000 300 000 798 000 3 198 000 TOTAL LIABILITIES AND EQUITY 3 435 000 3 435 000

Retained Profit $ Balance c/d Impairment loss on goodwill Depreciation-undercharged Unrealised profit on inventories 929 128 Sunny Ltd (balancing figure) 30 000 Windy Ltd (80% post-acq retained profit) 4 672 (475000-(269000-20000)) 15 000 978 800 978 800 $ 798 000 180 800

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VERSION 2- Based on LATEST HKAS: If pre-acquisition dividend income may not be deducted from the cost of investment at company level i.e. in holdings company account (but must be elminated in the the consolidated Accounts.) (a) (1)
Cost of control $ Sunny Ltd Investment in Windy Ltd Windy Ltd (80% pre-acq equity) 1 234 000 Ordinary shares Share premium Retained profit 269 000 x 80% Revaluation reserve (W1) Goodwill (on consolidation) 1 234 000 W1: (350000-400000*90%^3)*80% Goodwill $ Cosf of Control 108 080 Income statement: impairment loss Balance c/d 108 080 $ 30 000 78 080 108 080 800 000 64 000 215 200 46 720 108 080 1 234 000 $

(2)
Sunny Ltd Statement of comprehensive income for the year ended 31 December 2010 $ Turnover (1994000-840000+180000) Cost of sales (897000-425000+180000-15000) Gross Profit Other income (180000-60000) Selling and Administration (165000-72000) Administrative expenses (375840-110000-5840-30000) Profit before tax Taxation (81000-35000) Profit after tax 1 334 000 (637 000) 697 000 120 000 (93 000) (230 000) 494 000 (46 000) 448 000

Fac cebook: Aaron nlee.edu@gmail.com Sunny Ltd L State ement of finan ncial position as at 31 Decem 2010 mber Non-c current assets s Proper plant and equipment, ne (3293560-1 rty, et 1421000-5840 00+5840) Investm in Wind Ltd (w) ment dy $ 1 820 000 1 234 000 3 054 000 Curre Assets ent Invent tories (216500 0-110000+150 000) Trade receivables (1 178500-12300 00+24000) Cash at bank (30300 a 00-101000-60 000) 121 500 79 500 196 000 397 000 TOTA ASSETS AL Curre Liabilities ent s Trade payables (342 2000-170000+ +18000) Tax pa ayable (77000 0-30000) 190 000 47 000 237 000 Equity y Ordina shares of $ each ary $2 Share Premium Retain Profit (w) ned 2 100 000 300 000 814 000 3 214 000 TOTA LIABILIT AL TIES AND EQUITY 3 451 000 3 451 000

R Retained Prof fit $ Balanc c/d ce Impair rment loss on goodwill Deprec ciation-underc charged Unreal lised profit on inventories n Divide income re end eceived 929 9,128 Sunny Ltd (balancing figure) L g 30 0,000 Windy Ltd (80% post-acq retained profit) d 4 4,672 (475000 0-(269000-200 000)) 15 5,000 16 6,000 994 4,800 994,800 9 $ 814,000 8 180,800 1