On 1st January 2022 Company A acquired 51% of the ordinary shares of Company B. The Statement of Financial Position on 1st January 2022 of the different companies is as follows: Non-current Assets Property, Plant and equipment Investment on Company B Current Assets Trade receivables Cash Total Assets Equity Capital (ordinary shares) General reserve Retained earnings Non-current Liabilities Long-term debt Current Liabilities Company Company A B 130,000 65,000 95,000 20,000 40,000 80,000 22,500 325,000 127, 500 200,000 60, 000 45,000 25,000 25,000 10,000 30,000 18,000 Trade payables 25,000 14,500 Total Equity and Liabilities 325, 000 127, 500 Considering that there are not changes in the value of equity between the acquisition and the reporting date for any of the companies, which of the following statements is true regarding Company A's Consolidated Statement of Financial Position on 1st January 2022? a. Company A needs to create the consolidated financial statements following the equity method. b. The consolidated statement of financial position will show a goodwill of £95,000. C. The consolidated statement of financial position will show a goodwill of £46, 550 and non- controlling interests of the same amount. d. None of the answers is true.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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S6).

 

On 1st January 2022 Company A acquired 51% of the ordinary shares of Company B. The Statement of
Financial Position on 1st January 2022 of the different companies is as follows:
Non-current Assets
Property, Plant and
equipment
Investment on Company B
Current Assets
Trade receivables
Cash
Total Assets
Equity
Capital (ordinary shares)
General reserve
Retained earnings
Non-current Liabilities
Long-term debt
Current Liabilities
Company Company
A
B
130,000
95,000
20,000 40,000
80,000 22,500
325,000 127,500
65,000
200,000 60,000
45,000 25,000
25,000
10,000
30,000
Trade payables
25,000
Total Equity and Liabilities 325,000
18,000
14,500
127,500
Considering that there are not changes in the value of equity between the acquisition and the reporting
date for any of the companies, which of the following statements is true regarding Company A's
Consolidated Statement of Financial Position on 1st January 2022?
a. Company A needs to create the consolidated financial statements following the equity method.
b. The consolidated statement of financial position will show a goodwill of £95, 000.
C. The consolidated statement of financial position will show a goodwill of £46, 550 and non-
controlling interests of the same amount.
d. None of the answers is true.
Transcribed Image Text:On 1st January 2022 Company A acquired 51% of the ordinary shares of Company B. The Statement of Financial Position on 1st January 2022 of the different companies is as follows: Non-current Assets Property, Plant and equipment Investment on Company B Current Assets Trade receivables Cash Total Assets Equity Capital (ordinary shares) General reserve Retained earnings Non-current Liabilities Long-term debt Current Liabilities Company Company A B 130,000 95,000 20,000 40,000 80,000 22,500 325,000 127,500 65,000 200,000 60,000 45,000 25,000 25,000 10,000 30,000 Trade payables 25,000 Total Equity and Liabilities 325,000 18,000 14,500 127,500 Considering that there are not changes in the value of equity between the acquisition and the reporting date for any of the companies, which of the following statements is true regarding Company A's Consolidated Statement of Financial Position on 1st January 2022? a. Company A needs to create the consolidated financial statements following the equity method. b. The consolidated statement of financial position will show a goodwill of £95, 000. C. The consolidated statement of financial position will show a goodwill of £46, 550 and non- controlling interests of the same amount. d. None of the answers is true.
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