Consolidation and acquisition: below are the statements of financial
Assignment
Below are the statements of financial position and income statements for Xing plc and
its subsidiary and associated companies, Yen and Zhen respectively, for the 12-month
period to 31 March 20X1.
Statements of Financial Position as at 31/03/20X1- All £
Xing Yen Zhen
Non-current assets
Property, plant, equipment 435,000 285,000 195,000
Investment in subsidiary 220,000
Investment in associate 60,000
715,000 285,000 195,000
Current assets
Inventories 275,000 90,000 68,000
Trade receivables 160,000 48,000 35,000
Bank 36,000 5,000 8,000
471,000 143,000 111,000
Current liabilities
Trade payables -147,000 -72,000 -42,000
Dividend payable -200,000 -10,000 -9,000
-347,000 -82,000 -51,000
Net current assets 124,000 61,000 60,000
Non-current liabilities
Loan -120,000 -60,000 -25,000
Total net assets 719,000 286,000 230,000
Equity and reserves
Share capital 500,000 200,000 185,000
General reserve 50,000 16,000 10,000
Retained earnings 169,000 70,000 35,000
Shareholder’s funds 719,000 286,000 230,000
Xing plc acquired a 75% holding in Yen, Ltd., on 1 February 20X0 when the general
reserves of Yen were £9,000 and retained profits were £30,000. At the date of
acquisition, the fair value of Yen, Ltd., property, plant and equipment was considered
to be £8,000 higher than its book value. After carrying out an asset impairment review
test, the management of Xing plc decided to write off 8% of the capitalised goodwill
on acquisition as an impairment loss at the end of the year to 31 March 20X1.
During the year to 31 March 20X1 Xing has sold Yen goods with a value of £50,000
including a 30% margin on sales. At the end of the year, 80% of these goods
remained in stock.
Xing plc. also purchased a 25% shareholding in Zhen Ltd on 1 April 20X0, when the
book values were considered to be the same as the fair value at acquisition. The
general reserve of Zhen, Ltd., on acquisition was £6,000, and retained profits were
£14,000.
Be sure to include your calculations within the same MS Word that you type
your assignment in.
Required:
a) Prepare the group consolidated statement of financial position for Xing plc
and its group of companies for the year to 31 March 20X1.
b) Critically discuss the factors that Xing plc will have considered in
determining the fair values upon acquisition.
