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Complex Group Accounting Scenarios

Smith Co acquired 80% of Jones Co on October 1, 20X5 for $324,000. As of September 30, 20X8, Jones Co had retained earnings of $180,000. Smith Co is required to prepare consolidated financial statements under different circumstances: (a) If Smith Co sells its entire holding in Jones Co on September 30, 20X8 for $650,000 (b) If Smith Co sells 25% of its holding in Jones Co on June 30, 20X8 for $160,000 (c) If Smith Co sells 50% of its holding in Jones Co on June 30, 20X8 for $340,000 and accounts for the remaining 50% holding as

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45 views1 page

Complex Group Accounting Scenarios

Smith Co acquired 80% of Jones Co on October 1, 20X5 for $324,000. As of September 30, 20X8, Jones Co had retained earnings of $180,000. Smith Co is required to prepare consolidated financial statements under different circumstances: (a) If Smith Co sells its entire holding in Jones Co on September 30, 20X8 for $650,000 (b) If Smith Co sells 25% of its holding in Jones Co on June 30, 20X8 for $160,000 (c) If Smith Co sells 50% of its holding in Jones Co on June 30, 20X8 for $340,000 and accounts for the remaining 50% holding as

Uploaded by

Simon Yossef
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

COMPLEX GROUP ACCOUNTING

Question
Smith Co bought 80% of the share capital of Jones Co for $324,000 on 1 October 20X5. At that date
Jones Co's retained earnings balance stood at $180,000. The statements of financial position at 30
September 20X8 and the summarised statements of profit or loss to that date are given below.
Smith Co
$000

Jones Co
$'000

ASSETS
Non-current assets
Investment in jone co.
Current assets

360
324
370

270
370

$1 ordinary shares
Retained earnings
Current liabilities

540
414
100

180
360
100

Profit before tax


Tax
Profit for the year

153
(45)
108

126
(36)
90

No entries have been made in the accounts for any of the following [Link] is the group's policy
to value the non-controlling interest at its proportionate share of the fair value of the subsidiary's
identifiable net assets.

Required
Prepare the consolidated statement of financial position and statement of profit or loss at 30
September
20X8 in each of the following circumstances. (Assume no impairment of goodwill.)
(a) Smith Co sells its entire holding in Jones Co for $650,000 on 30 September 20X8.
(b) Smith Co sells one quarter of its holding in Jones Co for $160,000 on 30 June 20X8.
(c) Smith Co sells one half of its holding in Jones Co for $340,000 on 30 June 20X8, and the
remaining holding (fair value $250,000) is to be dealt with as an associate.
(d) Smith Co sells one half of its holding in Jones Co for $340,000 on 30 June 20X8, and the
remaining holding (fair value $250,000) is to be dealt with as an investment in equity
instruments.

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