N1612 Week 4 Workshop Questions
Q1 Choose one answer
Squeeze ltd acquired 75% of Juice ltd for £250,000 on 1.5.2023. On that date Juice ltd equity section in the balance sheet had the following:
£
Share capital (£1) 100,000
Share premium 50,000
Retained earnings 110,000
The fair value of non-controlling interest was estimated at £40,000
The goodwill in Juice (non-controlling interest measured at fair value) at acquisition date is:
A £10,000
B nil
C £100,000
D £40,000
E £30,000
Q2 Choose one answer
Squeeze ltd acquired 75% of Juice ltd for £250,000 on 1.5.2023. On that date Juice ltd equity section in the balance sheet had the following:
£
Share capital (£1) 100,000
Share premium 50,000
Retained earnings 110,000
Juice ltd’s share price on 1.05.2023 was quoted at £2.00 and on that date the fair value of its identifiable assets was the same as their book value.
The goodwill in Juice (non-controlling interest measured at fair value) at acquisition date is:
A £10,000
B nil
C £100,000
D £40,000
E £150,000
Q3 Choose one answer
Squeeze ltd acquired 70% of Juice ltd for £260,000 on 1.5.2023. On that date Juice ltd had in issue 100,000 ordinary shares of £1 (each issued at 150p when the company was incorporated). The share price of Juice Ltd was quoted at 190p on 1.5.2023.
On 1.5.2023 Juice's retained earnings were £90,000 and the fair value of its identifiable assets was the same as their book value.
The goodwill in Juice (non-controlling interest measured at fair value) at acquisition date is:
A £77,000
B nil
C £100,000
D £40,000
E £246,000
Q4
South acquired 400,000 ordinary shares of West Ltd on 1 January 2023 (there has been no change in share capital since). The retained earnings of West on 31 Dec 2022 were £120,000.
The fair value of the 20% non-controlling interest at acquisition was £120,000.
Goodwill should be written down by 10% of its original value to allow for impairment.
Below are the statements of financial position of as at 31 Dec 2023.
Other information:
- During the year, West sold goods to South for £200,000 at a mark-up of 25%. On 31 Dec 2023, half of these goods are still at the inventory of South.
- The current liabilities of West include £25,000 owed to South.
Prepare the consolidated statement of financial position of South Group as at 31 December 2023, assuming the group uses the fair value method to account for non-controlling interest.
Include all relevant workings.
Question 5
Jazz acquired 80% of the share capital of Blues on 1 Feb 2023. The retained earnings of Blue on 30 Sept 2022 were £125,000.
The fair value of the 20% non-controlling interest at acquisition was £220,000.
At acquisition the fair value of Blues’ plant exceeded its book value by £150,000. Plants are depreciated at 10% rate (straight line method).
Goodwill should be written down by £20,000 of its original value to allow for impairment.
Below are the statements of financial position of as at 30 Sept 2023.
Other information:
- During the year, Jazz sold goods to Blues for £100,000 at gross profit margin of 30%. On 30 Sept 2023, half of these goods are still at the inventory of Blues.
- The current liabilities of Jazz include £25,000 owed to Blues.
Prepare the consolidated statement of financial position of Jazz Group as at 30 September 2023, assuming the group uses the fair value method to account for non-controlling interest.
Include all relevant workings.
Question 6 (self-study)
Jazz acquired 60% of the share capital of Blues on 1 Jan 2019. The retained earnings of Blue on 30 Sept 2018 were £105,000.
The fair value of the 40% non-controlling interest at acquisition was £220,000.
At acquisition the fair value of Blues’ plant exceeded its book value by £160,000. Plants are depreciated at 10% rate (straight line method).
Goodwill should be written down by £40,000 of its original value to allow for impairment.
Below are the statements of financial position of as at 30 Sept 2019.
Other information:
- During the year, Blues sold goods to Jazz for £100,000 at gross profit margin of 30%. At 30 Sept 2019, half of these goods are still at the inventory of Jazz.
- The current liabilities of Jazz include £25,000 owed to Blues.
Prepare the consolidated statement of financial position of Jazz Group as at 30 September 2019, assuming the group uses the fair value method to account for non-controlling interest.
Include all relevant workings.