Online Exam

This document provides study materials and solutions for an online exam. It includes solved questions and calculations related to various topics such as group structure, consideration transferred, fair value of net assets, post acquisition profit, goodwill, consolidated retained earnings, cash flow statement, contract accounting, commission calculation, and depreciation. The document also discusses the accounting treatment for buildings, currency selection, and financial reporting concerns.

ONLINE EXAM

Contents
MAIN BODY............................................................................................................................4
SECTION A...........................................................................................................................4
Question 1..............................................................................................................................4
Question 2..............................................................................................................................4
SECTION B...........................................................................................................................4
Question 4..............................................................................................................................4
Question 5..............................................................................................................................4

SECTION A
Question 1
A).
Solution to
Question 1
Step 1
Group structure
Parent 70%
NCI 30%
Step 2
Calculate the consideration transferred £000
Cash 220,000
Contingent consideration 20,000
Deferred consideration (200m x 0.83) 166,000
Consideration transferred 406,000
Dr Investment 186,000
Cr Deferred consideration 166,000
Cr Contingent consideration 20,000
Step 3
Calculate Fair value of net assets at the date of acquisition and at the reporting date.
FV of Net
Assets FV of Net Assets
01-04-19 31-03-20
£000 £000
Share capital 100,000 100,000
Retained earnings 24,000 55,000
Fair value adjustment for land (4000 -
5000) (1,000) (1,000)
Fair value adjustment-buildings (10,000 -12,000) (2,000) (2,000)

Reduced depreciation for buildings (-
2000/20) 100
Fair value adjustment-plant (30000-
20000) 10,000 10,000
Additional
depreciation (2,000)
131,000 160,100
Calculate the post acquisition profit of
Mane £000
Fair value of Mane assets at the reporting
date 160,100
Fair value of Mane assets at the date of acquisition (131,000)
Post acquisition profit/loss 29,100
This will be shared between the group and the NCI as follows:
£000
Group (70%) 20,370
NCI (30%) 8,730
29,100
Step 4: Calculate the goodwill at the date of acquisition and at the
reporting date
£000
Consideration transferred 406,000
Fair value of NCI (30% x 200m x 2) 120,000
526,000
Fair value of net assets at acquisition date (from
step 2) (131,000)
Goodwill arising on
acquisition 395,000

Step 5
Calculate the NCI at the reporting date £000
Fair value of NCI at the date of
acquisition 120,000
Add NCI' share of the post acquisition profit of
Beta 8,730
NCI at the reporting date 128,730
Step 6
Calculate the consolidated retained
earnings £000
Alpha's retained earnings 153,000
Unrealised profit on goods sold to Trent (30% x 5m
x 20%) (300)
Add group's share of Associate's profit (30% x(55000-30000) 7,500
Add group's share of the post acquisition loss of
Mane 20,370
Decrease in contingent consideration 5,000
Interest on deferred consideration (10% x166,000) (16,600)
168,970
Step 7: Investment in
Associate £000
Cost of investment in Associate (Note 4) 40,000
Share of Associate's post acquisition profit 7,500
Less unrealised profit on goods sold to Associate (300)
47,200
Alpha group
Consolidated Statement of Financial Position at
31 March 2016 £000 £000

Non current assets
Goodwill 395,000
Property plant and equipment(224000+130000+10000-1000-
3000+100) 360,100
Investment in Associate 47,200
Other investment (140000-200000-40000) (100,000)
702,300
Current assets
Inventory(57000+30000) 87,000
Trade
receivable(30000+26000) 56,000
Cash and cash equivalents (18000+4000+5000) 27,000 170,000
872,300
Equity and
liabilities
Share capital 120,000
Consolidated retained earnings 168,970
288,970
Non-controlling
interest 128,730
417,700
Non-current
liabilities
Long term borrowings (150000+10000) 160,000
Contingent consideration 15,000
Deferred tax (10000+8000) 18,000 193,000
Current liabilities
Trade payables (30000+22000) 52,000
Deferred consideration (166000+16600) 182,600
Short-term borrowings (6000+6000) 12,000
246,600
857,300

B).
At each of the three primary controls listed above, IFRS 10 makes reference to the
suggestions. This is a complete tutorial. The part guide separately may feel that every "link"
to other material requires a definite control evaluation. Bear in mind, though, that all five
modules are connected and all 3 should really be monitored.
Strength
IFRS 10 corroborates which rights are the root of power. The rights represent the force to
allow the financial specialist to arrange "unique experiments" in a specific way, as applicable
(see below). "maximum cost" throughout this situation may not need the opportunity to be
automatically exercised. Things considered, it is necessary to ensure that civil liberties can be
exerted before selecting proper exercises.
Dependent return participation or privileges
To be in charge of a financial specialist, in return for the operator, he should have closing or
discretionary rights. Component distributions are extensively characterized and go well
beyond profitability property investment profits.
Capacity to leverage control in order to manipulate returns
The chapter 3 of the examination is that a fund manager will affect his income (in some cases
referred to as a "link"). This relation depends on the capacity of the finance specialist to
organise the simulations (dynamic rights). It is up to a bigger portion of shareholdings to
attach a power to an impossible restoration to a regular parent-helper partnership. Similarly,
in these situations no subjective study is appropriate. In any situation, this third component of
the authority is necessary where, for particular, the management of the company or service
holds dynamic privileges as a result of a management arrangement or comparative strategy.
Question 2
A)
Profit before tax 2950
Interest payable (250)
Interest receivable 0
Amortization of government grants 0
Depreciation of buildings 150

Profit on the sale of plant 120
Depreciation of plant 340
Operating profit before working capital adjustments
Increase in inventory 3000
Increase in trade receivables 800
Decrease in accounts payable 1550
Cash generated from operations 4,530
Interest paid 350
Tax paid 480
Net cash inflow from operating activities 3,835
Investing activities
Cash paid for investments
Cash paid for plant 300
Cash received from the sale of plant 470
Cash paid for buildings (870)
Government grants received 250
Interest received 440
Net cash outflow for investing activities (560)
Financing activities
Dividends paid
(4,645
)
Finance lease obligations (440)
Cash from issue of shares 1,600
(3,485)
Decrease in cash (210)
Cash and bank at the beginning of the year 70
Cash and bank at the end of the year (140)
Reconciliation of cash and cash equivalents 2011 2010 Inflow/
(outflow

)
Bank 50 150 (100)
Overdraft
(190
) (80) (110)
(140
) 70 (210)
b)
The primary issues found in the cash flow statement by Firmino are the negative balance
between all spending and funding operations, which in total makes the three activities that
losing balance. These two operations are thus the key problems revealed by cash flow
statement. As these operations result in a capital outflow from the financial accounts of the
organisation which are reflected in the reduction in cash and cash equivalents.
c)
Operating benefit or cash inflows in operations are the key factors of returns on capital during
2020. The activities benefit has been taken into account in determining the return on the
employed money. Where employed investment is mixed into equity and debt. The only factor
contributing to the company's return is net profit before interest and tax.
SECTION B
Question 4
A) Price of contract = £600,000
Interest rate = 10%
The accounting treatment for the contract between king and customers is as follows:
01/01/2019 Cash a/c £600,000
01/01/2019 Contract Liability £600,000
31/12/2020 Contract liability £660,000

31/12/2020 Revenue to king £600,000
Interest received £60000
B) Rate of commission = 10% of sales price
Total sales for computer4u in year 2020 = £500,000.
Carrying amount before impairment
500,000.0
0
Rate of commission 50000.00
Carrying amount at 31 December if impairment had not taken place in
2018 450000
C)
• Solar equipment procurement as well as
• Five years in ownership of machinery.
The net selling price is essentially a fixed factor of £1.8 million with an inviting value of
£100,000 or £200,000. The dependent component is included in the transmit power in
consideration of chance it has occurred. Therefore it was appropriate to have a dependent
variable of £100,000 and a combined pricing of £190,000. The selling price needs to be
delegated to the manufacturing obligations in accordance with certain solar values. This
really is £1,700,000, and the whole case is £300,000.
The obligation to support the machine mounted would then amount to £1615,000
( £1,700,000/2,000,000) x 1,900,00,000 to include FIVE hours a month of the installation.
The responsibility to provide enough implemented device is completely met mostly during
fiscal year 2018 31, December 2016, and sales of £1,615,000 for this service could also be
reported.
In reality, 7/60 (from 1 December to 31 December, 7 months) was achieved in the fiscal year
2018 31 December 2016 and therefore sales of £33,250 (£285,000 x 7/60) could be
acknowledged by the outcome of such deliveries.
Klopp will acknowledge £1,900,000 available on or under the relevant value of the contract
beginning 1 June 2016. On 31 December 2016 the cumulative income of Klopp were
estimated at £251,750 (€1.9 million – £1.615 thousand – 33 250). It was £57,000 (£251,750 x
12/53) in debt today. The additional £194,750 (£251,750-57000) is the new responsibility not
available.

53= 60 months + 7 months (1 June 2016 to 31 December 2016 is a period of 7 months).
(b) The purchase rates relevant effects of particular goods that can be returned to the
customer.
Though this figure is specifically measured, revenues are forecast and total income is
projected at £4,320,000 (90 percent 800x £6,000). The bursary is called the £4,800,000 (800
x £6,000) for receivables.
The refund is 480,000 pounds (47,000 pounds - 43,000 pounds). This is called an existing
responsibility. Gross values for sold goods (800 x £3,500) amounted to £2,800,000. The
balance will equate to £2,520,000 (90% x 800x £3,500), which will be charged as sales costs.
The outstanding £280,000 is known to have the RIV Right (€2,800,000 -€2,520,000). Current
expenditure.
Question 5
(A)
the accounting treatment for the building on 31 December 2020
Purchasing of building: £20 million
Useful economic life: 50 Years
Fair value of building: £24 million
fair value of the building: £14 million
Calculation of depreciation (Straight line method): Cost of assets-Salvage
value/useful life
Cost of assets £20 million
Salvage value £14 million
Useful life 50 Years
Calculation of depreciation (20-14)/50
Depreciation 120000
(B) Advice about which currency need to utilize:
In the aspect of above case, they need to deal in Pounds as they get all necessary
material from their parent company which is located in UK. This case is considered as
functionally currency. Because a company's financial statements are published in just one
currency, it is important to translate the purchases or transactions made in another currency

back to the primary currency used for the financial reports. Guidance on the conversion of
foreign currencies is provided by the International Accounting Standards (IAS) and the
Widely Agreed Accounting Principles (GAAP). The challenging option of choosing a
functional currency for international activities must overcome many financial reporting
concerns, including the determination of suitable local currency, adjusting for foreign
exchange sales and the translation of foreign affiliates' financial statements into restructuring
exchange rates of the parent business.
(C) Advise the directors of Jack on to how to account for the above transactions.
Date Particulars DR CR
1 January
2020
Patent account DR
To cash a/c
40
40
1 January
2020
Land a/c DR
Depreciation a/c DR
To cash a/c
16
4
20
1 January
2020
Accounts receivables a/c DR (3*2)
To sales
6
6
1 November
2020
Land a/c DR
Depreciation a/c DR
To cash a/c
100
50
150
1 January
2020
Accounts receivables a/c DR (9*1.5)
To sales
13.5
13.5