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.

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