Reference no: EM132644985
The following are the statements of financial position of Pelhams Ltd and Selbourne Ltd as at 30 June 2019.
Pelhams Ltd Selbourne Ltd
Non-Current Assets :
Land 4,500 2,500
Plant and Equipment 2,400 1,750
Investments 8,000 0
Current assets 14,900 4,250
Inventory 3,200 900
Receivables 1,400 650
Bank 600 150
5,200 1,700
TOTAL ASSETS 20,100 5,950
Equity and Liabilities
Equity ordinary capital- 5,000 1,000
Retained earnings 8,300 3,150
13,300 4,150
Liabilities
Non- Current liabilities
8% Loan notes 4,000 500
Current Liabilities 2,800 1,300
Total Eq & Liabilities 20,100 5,950
Additional information:
Note 1
Pelhams Ltd acquired 75% of Selbourne Ltd on 1 July 2016 when the balance on Selbourne Ltd Retained Earnngs was N$1 150. Pelhams paid N$3 500 for its investment in the share capital of Selbourne. At the same time Pelhams invested in 60% of Selbourne's Loan stock.
Note 2
At the reporting date Pelhams recorded a payable to Selbourne of N$400. This did not agree to the corresponding amount in Selbourne's financial Statements of N$500. The difference is explained as cash in transit.
Note 3:
At the date of acquisition, it was determined that Selbourne's land, carried at a cost of N$2 500 had a fair value of N$3 750. Selborne's plant was determined to have a fair value of N$500 in excess of its carrying value and had a remaining life of 5 years at this time. These values had not been recorded by Selbourne Ltd.
Note 4:
The Pelhams group uses the fair value method to value the Non- Controlling interest. For this purpose, the subsidiary share price at the date of acquisition should be used. The subsidiary share price at acquisition was N$2, 20 per share.
Note 5:
Goodwill has impaired by N$100
Required:
Question 1: Prepare the Consolidated Statement of Financial Position as at 30 June 2019 25
Question 2: Discuss the difference between deferred consideration and contingent consideration