1. Consolidation Plateau ACCA Decemer 2007 1

2. Step 1 Copy out the question PSAdjustmentsConsolidated PPE 1840010400 Investments 132500 Fval Inv 650030 Inventory 69006200 Receivables 32001500 Bank 00 4825018100 2

3. Step 1 Copy out the question PSAdjustmentsConsolidated Equity100004000 Ret Earnings 16000 +9250 6500+ 2400 7% Loan50001000 Payables80004200 Overdraft00 4825018100 3

4. Consolidation Format- Goodwill  What did we pay? What did we get?  Date 1 October 2006  Acquired 3m shares, =75%  Paid 3m x 0.5x 6= 9m  Cash 1.25 x3m = 3.75m  Total paid $12.75 4

5. Consolidation Format- Goodwill  Paid $12.75m + NCIs $3.25m = $16m  Received  Shares 4m  Retained earnings = 6.5m  Fair value adjustments = $(0.5)m (note 1)  Goodwill = 16- 10= 6m on acquisition 5

6. Consolidation Format- S Retained Earnings 6 On Acquisition30 September 2007 Share Capital4000 Retained Earnings65008900 Fair value adjustment (500) Interco Profit(300) Total1000012600

7. Consolidation Format- Retained Earnings  P = 25250  Acquisition costs (500)  Fair V investments 2500  S post acq 2600x75%= 1950  Axle 1500 Total 30700 7

8. Consolidation Format- NCI Value at acq3250 Post acq Res (2600x25%) 650 Total 3900 8

9. PSAdjustmentsConsolidated PPE1840010400 28800 Investments132500(13250)0 Goodwill6000 Axle9000+150010500 Fval Inv6500 25009000 Inventory69006200(300)12800 Receivables32001500 4700 Bank00 482501810071800 9

10. PSAdjustmen ts Consolidate d Equity100004000-4000 +1500 11500 Share Premium 7500(1.5mx 5) 7500 Ret Earnings 16000 +9250 6500+ 2400 30700 7% Loan500010006000 Payables8000420012200 NCI3900 Overdraft00 482501810071800 10