UNIVERSITY OF SRI JAYEWARDENEPURA

FACULTY OF MANAGEMENT STUDIES AND COMMERCE

DEPARTMENT OF COMMERCE
COM 3341– ADVANCED FINANCIAL ACCOUNTING AND REPORTING
B. Com (Special) Degree - Part III, Semester I – 2023
Tutorial -5

Question 1:
The statements of financial position have been prepared at 31 December 20X8
Dickens Jones
Rs Rs
Assets
Non current assets
Property, plant & equipment 85,000 18,000
Investment: shares in Jones 60,000 -

Current assets 160,000 84,000

305,000 102,000

Equity and Liabilities

Equity
Ordinary Rs.1 shares 65,000 20,000
Share premium 35,000 10,000
Retained earnings 70,000 25,000
170,000 55,000

Current liabilities 135,000 47,000

305,000 102,000

Dickens acquired 16,000 ordinary Rs. 1 shares in Jones on 01 January 20x8, when Jones
retained earnings stood at Rs.20,000 and its share premium was Rs.10,000. On this date, the
fare value of the 20% non controlling shareholding in Jones was Rs.12,500

Dickens group uses the fair value method to value the non -controlling interest.

Prepare the consolidated statement of financial position of the Dickens group as at 31

December 20X8

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Question 2:
On 1 January 20X9 Z acquired 60% of the ordinary shares of X. The following statements of
profit or loss have been produced by Z & X for the year ended 31 December 20X9.
Z X
Rs’000 Rs’000

Revenue 1,260 520

Cost of sales (420) (210)
Gross profit 840 310
Distribution costs (180) (60)
Administration cost (120) (90)
Profit from operations 540 160
Investment income from X 36 -
Profit before tax 576 160
Income tax (130) (26)
Profit for the year 446 134

During the year ended 31 December 20X9 Z sold Rs.84,000 worth of goods to X. These goods
had cost Z Rs.56,000. On 31st December 20X9 X still had Rs.36,000 worth of these goods in
inventories (held at cost to X)

Prepare consolidated statement of profit or loss for Z group for the year ended 31
December 20X9.

Question 3:
The given below are the statements of profit or loss for P & L for the year ended 31 December
20X5.
P L
Rs’000 Rs’000

Revenue 3,200 2,560

Cost of sales (2,200) (1,480)
Gross profit 1,000 1,080
Distribution costs (160) (120)
Administration cost (400) (80)
Profit from operations 440 880
Investment income 160 -
Profit before tax 600 880
Income tax (400) (480)
Profit for the year 200 400

Additional information

• P paid Rs.1.5 Mn on 31 December 20X1 for 80% of L’s 800,00 ordinary shares.

• Goodwill impairments at 1 January 20X5 amounted to Rs.152,000. A further impairment

of Rs. 40,000 was found to be necessary at the year end. Impairments are included
within administrative expenses.

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 • P made sales to L at a selling price of Rs.600,000 during the year. Not all of the goods
had been sold externally by the year end. The profit element included in L’s closing
inventory was Rs.30,000.

• Additional fair value depreciation for the current year amounted to Rs.10,000. All
depreciation should be charged to cost of sales.

• L paid an interim dividend during the year of Rs.200,000

• P values the non-controlling interest using the fair value method.

Prepare consolidated statement of profit or loss for P group for the year ended 31
December 20X5.

Question 4:
Statements of financial position for P and S as at 30th June 20X8 are set out below.
P S
Assets Rs’000 Rs’000
Non current assets
Land 4,500 2,500
Plant & equipment 2,400 1,750
Investments 8,000 --------
14,900 4,250
Current assets

Inventory 3,200 900

Trade receivable 1,400 650
Bank 600 150
5,200 1,700
20,100 5,950
Equity and Liabilities

Share capital: ordinary shares Rs.0.50 shares 5,000 1,000

Retained earnings 8,300 3,150
13,300 4,150

Non current liabilities:8% loan stock 4,000 500

Current liabilities 2,800 1,300
20,100 5,950
Notes:
• P acquired 75% of S on 1 July 20X5 when the balance on S’s retained earnings was
Rs.1,150. P paid Rs.3,500 for its investments in the share capital of S. At the same time,
P invested in 60% of S’s 8% loan stock.
• At the reporting date P’s payable included an amount due to S of Rs.400. This did not
agree to the corresponding amount in S’s financial statement of Rs.500. The difference
is explained as cash in transit.

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 • At the date of acquisition it was determined that S’s land, carried at cost of Rs.2,500 had
a fair value of Rs.3,750. S’s plant was determined to have a fair value of Rs.500 in
excess of its carrying amount and had a remaining life of 5 years at this time. These
values had not been recorded by S.
• The P group uses the fair value method to value the non-controlling interest. For this
purpose the subsidiary share price at the date of acquisition should be used. The
subsidiary share price at acquisition was Rs.2.20 per share.
• Goodwill has become impaired by Rs.100
Prepare the consolidated statement of financial position of the P group as at 30 June
20X8.
Question 5:
Below are the statements of financial position of three companies as at 30 September 20X8
P S A
Assets Rs’000 Rs’000 Rs’000
Non current assets
Property, plant & equipment 14,000 7,500 3,000
Investments 10,000 - -

Current assets 6,000 3,000 1,500

30,000 10,500 4,500

Equity and Liabilities

Rs.1 Ordinary Share : 10,000 1,000 500
Retained earnings 7,500 5,500 2,500

Non-Current liabilities 8,000 1,250 500

Current liabilities 4,500 2,750 1,000

30,000 10,500 4,500

Further information
1. P acquired 75% of the equity share capital of S several years ago, paying Rs.5 Mn in
cash. At this time the balance on S’s retained earnings was Rs. 3 Mn.

2. P acquired 30% of the equity share capital of A on October 20X6 paying Rs.750,000 in
cash. At 1 October 20X6 the balance on A’s retained earnings was Rs.1.5 Mn.

3. During the year, P sold goods to A for Rs. 1 Mn at a mark-up of 25%. At the year end, A
still held one quarter of these goods in inventory.

4. As a result of this trading, P was owned Rs.250,000 by A at the reporting date. This
agrees with the amont included in A’s trade payables.

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5. 5. At 30 September 20X8, it was determined that the investment in the associate was
impaired by Rs.35,000

6. 6. Non-controlling interests are valued using the fair value method. The fair value of the
non-controlling interest in S at the date of acquisition was Rs.1.6 Mn.

Prepare the consolidated statement of financial position of P as at 30 September

20X8

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