Acca financial Accounting (FA) Study Text ac ca (FA)

(Total: 15 marks)

 

---

PRACTICE QUESTIONS 

508

 

KAPLAN PUBLISHING

 

4 

BC and YZ

 

The statements of financial position for BC and YZ as at 31 December 

20X7 are presented below  

BC YZ 

$000

$000

Assets 

Non-current assets 

Property, plant and equipment 

240 

298 

Investment

400

–

Current assets: 

Inventories

75

56

Trade and other receivables 

120 

94 

Cash and cash equivalents 

5 

52 

––––––

––––––

Total assets 

840 

500 

–––––– –––––– 

Equity and liabilities 

Equity

Issued share capital 

300 

250 

Retained earnings 

342 

172 

Non-current liabilities: 

7% Bank loan 20X9 

100 

20 

Current liabilities: 

Trade and other payables 

98 

58 

––––––

––––––

Trade equity and liabilities 

840 500 

––––––

––––––

The following notes are relevant to the preparation of the consolidated 

financial statements for the year ended 31 December 20X7: 

(i)

BC acquired 75% of the ordinary shares of YZ for $400,000 several

years ago. At the acquisition date, the retained earnings of YZ were

$100,000. The fair value of the non-controlling interest in YZ at

acquisition was $100,000.

(ii)

The carrying amount of the net assets of YZ approximated their fair

values, with the exception of a plot of land. This land was recorded in

the accounts of YZ at its cost of $60,000 but was estimated to have a

fair value of $100,000. This land is still owned by YZ at 31 December

20X7.

(iii) During the year, BC sold goods on credit to YZ for $20,000, on which

it earned a margin of 30%. At the reporting date, two-thirds of these

goods were still included in the inventories of YZ. In addition, the

trade receivable and trade payable outstanding between the two

entities had not been settled by the reporting date.

---