Online Exam (Financial Reporting)

This document is an online exam on financial reporting. It includes questions and solutions related to topics such as group structure, consideration transferred, fair value of net assets, post acquisition profit, goodwill, consolidated retained earnings, statement of cash flows, commission calculation, performance obligations, and more.

Online Exam (Financial
Reporting)

Table of Contents
SECTION A.....................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................6
SECTION B.....................................................................................................................................8
Question 4....................................................................................................................................8
Question 5....................................................................................................................................9

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 £000 £000

2016
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.
The new control model in accordance with IFRS 10 relies on the presence of three control
parties. When all three control areas are free, a theorist is held accountable for an owner and
verification is required. When one of the parties is missing in any situation, a money master will
only say, but the ability of his relationship with the owner should be fully chosen (e.g. high
impact, co control) and the change in registration required by IFRS
The summaries of the IFRS 10 consolidated financial statements highlight the need to plan and
present unitary tax reports, while the materials integrate the components that administer it.
Clarity control or rights to a variable product and the ability to influence those benefits through
owner control.

Components of control:
1. Rights come from rights. These rights can be immediate (e.g. through equal rights) or
inalienable (e.g. introduced into definitive means). An inspector who only has security rights
cannot control an owner and therefore cannot own an owner
2. One had to find a theorist, or reserved options, to get a variable back from being controlled by
an owner. This result should be specific as a result of the involvement of the custodian and can
be positive, negative or both.
3. Not only should a parent have power over an owner and with open or variable rights recovered
from his or her relationship with the owner, a parent should also exercise authority over the
speculative to influence its exchange-to-owner benefits.
4. In analyzing whether a theorist controls an owner, a money master with dynamic rights
decides whether he should go around as a leader or an expert on certain sections. There are a
number of factors that need to be taken into account in making this assessment. For example, the
remuneration of the director is considered to determine whether he is an expert.
Question 2
A) Statement of Cash Flows for Firmino for the year ended 31 March 2020 in accordance
with IAS 7
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 main issues highlighted in Firmino’s income statement are negative changes in both the
activities of investing and financing, which usually result in a negative balance from each of the
three years. In this way, both of these exercises are the key issues found in income generation.
Because both exercises lead to an increase in cash from the ratio of the balance sheet of the
organization, and is reflected by a decreasing balance of money and equal cash in the cash
register.
c) The main drivers of profit for capital in the year 2020 are operating profit or cash inflows in
business years. This asset gain was considered to determine the return on capital employed.
Where the capital is used there is a mixture of equity and debt. The company's net profit on
interest and valuation is the only factor driving a return to the company.

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:
2019
Jan 1 Cash a/c £600,000
Jan 1 Contract Liability £600,000
Dec 31 Contract liability £660,000
Dec 31 Revenue to king £600,000
Interest received £60,000
B) Rate of commission = 10% of sales price
Total sales for computer4u in year 2020 = £500,000.
Carrying amount before impairment 500,000.
00
Rate of commission 50000.00
Carrying amount at 31 December if impairment had not taken place in
2018
450000
C)
Klopp has two performance obligations:
 To supply a Solar Equipment and To service the equipment over a period of five years.
The net purchase cost is in fact at a rate of £ 1.8 million and a sudden component of £ 100,000 or
£ 200,000. The conditions appear to have occurred; the memory of the factors is variable for
further development. Therefore, an initial part of £ 100,000 and a total cost of £ 190000 should
be included. Based on solar-based costs, the cost of the agreement should be charged to the
creative commitments. This is £ 1,700,000: £ 300,000 in total over this period. Of these, the
commitment to remember for the facility and arrangement to provide FIVE years of activity to

the workplace should be £ 1,615,000 (£ 1,700,000 / 2,000,000) x 1, 900, 00,000. During the
financial year ending 31 December 2016, the commitment to enter the facility was fully
honoured and a profit of £ 1,615,000 could be associated with this profitability.
Notice and in the fiscal year ended December 31, 2016, 7/60 (December 1 to December 31 seven
months) was undoubtedly satisfied with a commitment, so you can consider the payment as
resulting in these exchanges of £ 33,250 (£ 285,000 x 7/60).
Starting from 1 June 2016, Klopp will receive a payment of £ 1,900,000 following an appropriate
assessment of the situation. Klopp's total benefits of £ 251,750 (€ 1,900,000,000 - £ 1,615,000 -
33250) were discounted at 31 December 2016. The current connection would be £ 57,000 (£ 251,
750 x 12/53). The required balance is £ 194,750 (£ 251,750-57000).
53 = 60 months without seven months (from 1 June 2016 to 31 December 2016 there is a period
of 7 months).
b) As this number has been resolved in detail, the contracts will be assessed and the total
payment will be settled at £ 4,320,000 (90% 800x £ 6,000). The exchange is recognized as
credits for £ 4,800,000 (800 x £ 6,000).
The repayment commitment is £ 480,000 (£ 48,000 - £ 4320000). This gives the impression that
it is a current duty. The total cost was £ 2,800,000 for products sold (800 x £ 3,500). Only £
2,520,000 of the total will be included as the cost of the offer (90% x 800x £ 3,500). It is
estimated that over £ 280,000 is available as an option to restore existing facilities (£ 2,800,000 -
£ 2,520,000).
Question 5
(A)
The accounting treatment for the building on 31 December 2020
Purchasing of building: £20 million
Useful economic life: 50 Years
F.V of building: £24 million

F.V 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:
They need to exchange location notes from the above location as they will receive all necessary
material through their UK based parenting initiative. This condition is seen as pragmatic. Since
corporate cash reports are issued in only one cash level, it is important to report contracts or
actions executed in another currency in the primary currency used at the time of publication.
Generally Accepted Accounting Principles (IAS) and Accounting Guidelines provide rules on
the interpretation of unfamiliar forms of liquidity (GAAP). A variety of cash disclosure issues,
including selecting the required neighbourhood currency, adjusting for uncommon currency
exchanges, and transforming uncommon supporting currency ratios into parental element
exchange measures, from reconcile with the horrible decision to choose to invest money for
stocks around the world. (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