Mercy Limited Statement of Financial Position

The provided content is the statement of financial position and statement of changes in equity for Mercy Limited as at June 30, 2016. The statement of financial position shows current assets of $1,110,000 and non-current assets of $3,060,000, totaling $4,170,000. Current liabilities are $1,105,000, resulting in net assets of $3,065,000. Equity includes share capital, reserves, and retained earnings. The statement of changes in equity shows a balance as on July 1, 2015, followed by total comprehensive income for the year, dividend payable, transfer to general reserve, and finally a balance as on June 30, 2016.

Solution – 1 – Preparation of Consolidation Worksheet Entries
STEP -1 – Preparation of Acquisition Analysis as on 1 July, 2013
Fair value of Identified assets and Liabilities
Share Capital 100,000
Reserves 5,000
Retained Earnings 10,000
Assets at fair value
Plant (2000 x (1 - 30%)) 1,400
Land (5000 x (1 - 30%)) 3,500
Inventory (4000 x (1 - 30%)) 2,800
Databases (6000 x (1 - 30%)) 4,200
Liabilities at fair value
Damages payable (-10000 x (1 - 30%)) (7,000)
Recorded Goodwill (5,000)
Net fair value of assets and liabilities 114,900
Consideration transferred 123,500
Less: Dividend receivable (6,000)
Net Consideration paid 117,500
Net Goodwill (117500 – 114900) 2,600
Goodwill already recorded 5,000
Unrecorded goodwill (2600-5000) (2,400)
STEP -2 – Business Combination Valuation Entries
Sr.
No. Particulars Amount (Dr.) Amount (Cr.)
1 Accumulated depreciation - Plant 26,000
Plant 24,000
Deferred tax liability 600
Business Combination Valuation Reserve 1,400
2 Depreciation expense 200
Retained earnings (1/7/16) 600
Accumulated depreciation (1/10 x $2 000 x 4) 800
3 Deferred tax liability 240
Income tax expense 60
Retained earnings (1/7/16) 180
4 Amortisation expense - databases 1,500
Retained earnings (1/7/16) 3,150

Transfer from Business Combination Valuation
Reserve 4,200
Income tax expense 450
5
Transfer from Business Combination Valuation
Reserve 7,000
Income tax expense 3,000
Damages expense 7,500
Gain 2,500
6 Accumulated impairment losses - goodwill 7,000
Business Combination Valuation Reserve 2,400
Goodwill 9,400
STEP -3 – Pre Acquisition Entry as at 1st July, 2013
Sr.
No. Particulars Amount (Dr.) Amount (Cr.)
1 Retained earnings (1/7/13) 10,000
Share Capital 100,000
Reserves 5,000
Business Combination Valuation Reserve 2,500
Shares in Sam Ltd. 117,500
2 Dividend Payable 6,000
Dividend Receivable 6,000
STEP -4 –Entry as at 30th June, 2017
Sr.
No. Particulars Amount (Dr.) Amount (Cr.)
1 Retained earnings (1/7/16) 19,300
Share Capital 100,000
Reserves 2,000
Business Combination Valuation Reserve 3,800
Shares in Sam Ltd. 117,500
2 Transfer from Reserves 2,000
Reserves 2,000
3 Business Combination Valuation Reserve 7,000
Transfer from Business Combination Valuation
Reserve 7,000
4
Transfer from Business Combination Valuation
Reserve 4,200

Business Combination Valuation Reserve 4,200
Solution – 2 – Preparation of Statement of Financial Position
Mercy Limited
STATEMENT OF FINANCIAL POSITION
For the year ended on 30 June, 2016
(Amount in $)
Particulars Notes As at
30 June, 2016
Current assets
Cash and cash equivalents
Trade and other receivables 1 590,000
Inventories 520,000
Total current assets - (a) 1,110,000
Non-current assets
Property, plant and equipment 2 2,300,000
Intangible assets
- Goodwill 300,000
Investments 460,000
Total non-current assets - (b) 3,060,000
Total assets - [(c)=(a)+(b)] 4,170,000
Current liabilities
Trade and other payables 3 656,000
Short term borrowings 200,000
Current tax liabilities 249,000
Total current liabilities - (d) 1,105,000
Total liabilities - (d) 1,105,000
Net assets (c-d) 3,065,000
Equity
Share capital 2,400,000
Reserves 290,000
Retained earnings 375,000
Total equity 3,065,000

Notes:
Note-1 - Trade and other
receivables
Particulars Amount (in $)
Receivable from trade customers
Account receivables 600,000
Allowance for impairment of receivables (60,000) 540,000
Receivable from others
Other debtors 50,000
Total 590,000
Note-2 - Property, Plant &
Equipment
Particulars Amount (in $)
Plant and equipment (net of depreciation) 800,000
Buildings (net of depreciation) 900,000
Land 600,000
Total 2,300,000
Note-3 - Trade and other payables
Particulars Amount (in $)
Trade Payables
Accounts payable 400,000
Other Payables
Dividend payable (3,200,000 shares @
0.08) 256,000
Total 656,000

Mercy Limited
Statement of Changes in Equity
For the year ended 30 June,
2016
Particulars
Share
Capital
General
Reserve
Retained
Earnings Total
Balance as on 1 July 2015 2,400,000 260,000 80,000 2,740,000
Total comprehensive income for
the year 581,000 581,000
Dividend payable (256,000) (256,000)
Transfer to general reserve 30,000 (30,000) 0
Balance as on 30 June 2016 2,400,000 290,000 375,000 3,065,000