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1) Prepare the consolidated statement of financial position of Aubin Plc as at 30 September 2015. 2) Intercompany transactions, receivables, liabilities and unrealised profits are eliminated on consolidation. a. Discuss 3 examples of intercompany transactions. b. What is meant by ‘are eliminated’? c. Explain what effect there could be on the consolidated financial statements if they were not eliminated.

1) Prepare the consolidated statement of financial position of Aubin Plc as at 30 September 2015. 2) Intercompany transactions, receivables, liabilities and unrealised profits are eliminated on consolidation. a. Discuss 3 examples of intercompany transactions. b. What is meant by ‘are eliminated’? c. Explain what effect there could be on the consolidated financial statements if they were not eliminated.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1) Prepare the consolidated statement of financial position of Aubin Plc as at 30 September 2015.

2) Intercompany transactions, receivables, liabilities and unrealised profits are eliminated on consolidation.

a. Discuss 3 examples of intercompany transactions.

b. What is meant by ‘are eliminated’?

c. Explain what effect there could be on the consolidated financial statements if they were not eliminated.

Aubin Plc prepares its consolidated financial statements in accordance with IFRS and has investments in two companies, Bobin Ltd and Cabin Ltd. The draft, summarised of financial position of the three companies at 30 September 2015 is as shown below: Cabin £000 Aubin Bobin £000 £000 Assets Non-current assets Property, Plant and Equipment Investments 7,080 6,000 13,080 2,800 3,600 2,800 3,600 Current assets 1,560 740 37.6 2,337.6 15,417.6 4,395.5 Inventories 1,350 890 Trade and other receivables 240 5.5 196 Cash and cash equivalents 0.5 1,595.5 1,086.5 4,686.5 Total assets Equity and Liabilities Equity Ordinary share capital (£1 share) Share premium account Retained earnings Total equity Non-current liabilities Borrowings 7,000 2,000 4,000 2,000 5,054.6 14,054.6 100 (111.5) 4,043.9 3,988.5 500 1,543.9 300 50 287 Current liabilities 678 Trade and other payables Bank overdraft 156.6 145.5 41.5 Taxation 385 145 301.6 224 1063 411 Total equity and liabilities 15,417.6 4,395.5 4,686.5
Transcribed Image Text:Aubin Plc prepares its consolidated financial statements in accordance with IFRS and has investments in two companies, Bobin Ltd and Cabin Ltd. The draft, summarised of financial position of the three companies at 30 September 2015 is as shown below: Cabin £000 Aubin Bobin £000 £000 Assets Non-current assets Property, Plant and Equipment Investments 7,080 6,000 13,080 2,800 3,600 2,800 3,600 Current assets 1,560 740 37.6 2,337.6 15,417.6 4,395.5 Inventories 1,350 890 Trade and other receivables 240 5.5 196 Cash and cash equivalents 0.5 1,595.5 1,086.5 4,686.5 Total assets Equity and Liabilities Equity Ordinary share capital (£1 share) Share premium account Retained earnings Total equity Non-current liabilities Borrowings 7,000 2,000 4,000 2,000 5,054.6 14,054.6 100 (111.5) 4,043.9 3,988.5 500 1,543.9 300 50 287 Current liabilities 678 Trade and other payables Bank overdraft 156.6 145.5 41.5 Taxation 385 145 301.6 224 1063 411 Total equity and liabilities 15,417.6 4,395.5 4,686.5
Additional information: (i) Aubin Plc acquired 1.6 million of Bobin Ltd's ordinary shares five years ago for £2.25 per share. The retained earnings of Bobin Ltd at that date were £375,000 credit. The fair value of a building held by Bobin Ltd at the date of acquisition was £1 million in excess of its carrying amount. The remaining useful life of the building at the date was 50 years. (ii) On 1 October 2011 Aubin Plc acquired 1.6 million of Cabin Ltd's ordinary share for £1.50 per share. The retained earnings of Cabin Ltd on that date were £143,000 credit. (iii) On 1 May 2015 Aubin Plc made a loan to Bobin Ltd of £50,000. The loan is repayable on 30 April 2018. Aubin Plc has included the loan in trade and other receivables. Bobin Ltd has disclosed the loan as long- term borrowings. (iv) During the year Bobin Ltd sold goods to Aubin Plc at a mark-up of 50%. The goods cost Bobin Ltd £90,000. At the yearend one-third of these goods remained in inventory. (v)Aubin Plc carries out annual impairment reviews of goodwill. At 30 September 2014 cumulative impairment losses in respect of goodwill arising on the acquisition of Bobin Ltd of £200,000 had arisen. A further loss of £40,000 arose during the current year and needs to be recognised. (vi) Due to an unexpected downturn in the performance of Cabin Ltd in the second half of the current year, Aubin Plc has calculated that an impairment in the carrying amount of its investment in Cabin Ltd of £30,000 needs to be recognised.
Transcribed Image Text:Additional information: (i) Aubin Plc acquired 1.6 million of Bobin Ltd's ordinary shares five years ago for £2.25 per share. The retained earnings of Bobin Ltd at that date were £375,000 credit. The fair value of a building held by Bobin Ltd at the date of acquisition was £1 million in excess of its carrying amount. The remaining useful life of the building at the date was 50 years. (ii) On 1 October 2011 Aubin Plc acquired 1.6 million of Cabin Ltd's ordinary share for £1.50 per share. The retained earnings of Cabin Ltd on that date were £143,000 credit. (iii) On 1 May 2015 Aubin Plc made a loan to Bobin Ltd of £50,000. The loan is repayable on 30 April 2018. Aubin Plc has included the loan in trade and other receivables. Bobin Ltd has disclosed the loan as long- term borrowings. (iv) During the year Bobin Ltd sold goods to Aubin Plc at a mark-up of 50%. The goods cost Bobin Ltd £90,000. At the yearend one-third of these goods remained in inventory. (v)Aubin Plc carries out annual impairment reviews of goodwill. At 30 September 2014 cumulative impairment losses in respect of goodwill arising on the acquisition of Bobin Ltd of £200,000 had arisen. A further loss of £40,000 arose during the current year and needs to be recognised. (vi) Due to an unexpected downturn in the performance of Cabin Ltd in the second half of the current year, Aubin Plc has calculated that an impairment in the carrying amount of its investment in Cabin Ltd of £30,000 needs to be recognised.
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