FR&A Revision Group Q8 - High, Sigh PDF

Preview

Summary

Revision Qn ...

Description

BMAN21020 Semester 1 Topic 4: Consolidated FS Revision Q8: High High plc purchased the following investments a number of years ago. There have been no changes in any shareholdings since acquisition: Sigh plc: (Sigh)  High acquired 3.4 million of the 4 million issued ordinary shares of Sigh on 1st April 2008 (3 years ago), when the Profit and loss reserve stood at £280,000. Sigh had no other reserves and there has been no change in ordinary shares since acquisition. In addition to its ordinary shares, Sigh has in issue 200,000 preference shares (nominal value £1), although High acquired none of these preference shares.  High capitalises goodwill in accordance with IFRS 3’s full provision method, and the Fair Value of the NCI (in ordinary shares) was £700,000.  High performed a fair value review on acquisition with the following findings: (i) Sigh had a (non-depreciable) piece of land in its statement of financial position which High considered to have a fair value £160,000 higher. (ii) Sigh also had a piece of specialist equipment which High considered to have a fair value £200,000 higher. Both companies depreciate such equipment over 5 years (20% straight line).  The goodwill arising from the acquisition was impaired in the year ended 31st March 2010 by £10,000, and again in the current year ended 31st March 2011 by £16,000. Lie plc:  High acquired a 20% interest in the ordinary shares of Lie for £200,000 in cash, when the P&L reserve stood at £30,000. Lie had no other reserves or equity and there has been no change in ordinary shares since acquisition.  High impaired its investment in its associate Lie for the second time in the year ended 31st March 2011 and now shows the investment at a value of £80,000 in the group Statement of Financial Position. A previous impairment of £50,000 was carried out in the year ended 31st March 2010. Other information: During the year, High made sales of £60,000 to Sigh, and at the balance sheet date, £13,000 of those goods remain unsold in the inventory of Sigh. High makes it sales using a cost-plus margin of 30%. The Draft Income Statements for the year ended 31st March 2011 of the companies are as follows: High Sigh Lie £'000 £'000 £'000 Turnover 2,240 733 120 Cost of sales 1,589 640 55 Gross Profit 651 93 65 Operating expenses 480 84 22 Operating Profit 171 9 43 Tax 51 3 13 Profit after tax 120 6 30 Dividends: - to Ordinary Shareholders 100 20 - to Preference Shareholders 20 Retained Profit 20 (34) 30 Profit Brought forward 4,890 289 50 Profit Carried forward 4,910 255 80 TASKS: a) Prepare Consolidated Income Statement for High plc the year ended 31st March 2011. b) Prepare extracts from the Consolidated Statement Of Changes In Equity for the year ended 31st March 2011 relating to movements in: i. non-controlling interest ii. retained earnings Prepare the following workings to support your answer Associate - Inv in Associate / PURP / FV adjs: depn (current and prior years) / Dividends from S to NCI and group / P&L reserves - b/f and c/f / NCI in the SOFP- b/f and c/f / NCI in the Income Statement: share of profit...