dfs june 2008

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Tamara
Tamara Registered Posts: 6 New contributor 🐸
hello everyone

im new to this forum.im currently working on dfs june 2008 and im stuck i cant seem to figure out how they got the figures for the attributed to holding company for the task 1.4 consolidated b/s. any help will be deepy appreciated. i hope im making sense:

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  • Steve Collings
    Steve Collings Registered Posts: 997 Epic contributor 🐘
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    Hi,

    Are you looking at W1 in the answer?

    The parent owns 60% of the subsidiary, so that's 60% of the share capital on acquisition, 60% of the share premium and 60% of the pre acquisition reserves (11,260 per the futher info in the question) at the date of acquisition and so on. Therefore:

    Share capital (60% x 10,000) = 6,000
    Share premium (60% x 5,000) = 3,000
    Fair value adj (60% x 2,500) = 1,500 (W2)
    Post acq reserves (W1 below) = 3,080
    Pre acq reserves (60% x 11,260) (per Q) = 6,756

    W1
    The fair value adjustment is the difference between the fair value and the book values on acquisition (see further information in the Q). The non current assets were uplifted by 2,500 on acquisition but only 60% is attributable to the parent - hence 1,500.

    W2
    Post acquisition reserves are calculated as the difference between the retained earnings balance at the date of acquisition (the pre acquisition reserves) in the further information in the Q i.e. 11,260. Compare this to the retained earnings in the balance sheet of the sub (14,340) then the difference is post acquisition profits of 3,080. 60% of the post acq profits gets added to the consolidated retained earnings figure because these profits were generated after the parent bought the sub.

    The total value of the net assets acquired of the subsidiary total 17,256. The parent has paid 32,000 for net assets worth 17,256 giving rise to goodwill of 14,744 (goodwill being essentially a 'balancing figure').

    The directors have said in the further information that the goodwill has suffered impairment by 25% therefore (14,744 x 25/100) = 3,686. This reduces the goodwill carrying value in the consolidated balance sheet and also reduces retained earnings, representing the debit to the income statement.

    I hope that helps.

    Regards
    Steve
  • Tamara
    Tamara Registered Posts: 6 New contributor 🐸
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    hi. thank u for getting bk to me so quickly and for helping me with this little dilema,this has helped me alot was looking at the question trying to find out where i went wrong now i know. thanks again.
  • jimmyd
    jimmyd Registered Posts: 4 New contributor 🐸
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    Hi,

    Please can someone explain the 17,256 to me... I appreciate it will be something totally obvious but I cannot for the life of me work out how that figure is calculated. :blushing:

    Thanks a lot
  • jimmyd
    jimmyd Registered Posts: 4 New contributor 🐸
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    Please ignore me, all the workings are on the next page of the answer booklet..... what a cretin.. there goes two hours of my study leave! God I need more than a week!!!:crying:
  • heartsandstars
    heartsandstars Registered Posts: 76 Regular contributor ⭐
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    Thanks Steve, I was struggling with this one earlier, but thanks to your answer I understand where I went wrong.

    (I ALWAYS forget to do the impairment adjustment - must impring this in my brain by Wednesday!)
  • Maria24
    Maria24 Registered Posts: 7 New contributor 🐸
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    Hi,

    Are you looking at W1 in the answer?

    The parent owns 60% of the subsidiary, so that's 60% of the share capital on acquisition, 60% of the share premium and 60% of the pre acquisition reserves (11,260 per the futher info in the question) at the date of acquisition and so on. Therefore:

    Share capital (60% x 10,000) = 6,000
    Share premium (60% x 5,000) = 3,000
    Fair value adj (60% x 2,500) = 1,500 (W2)
    Post acq reserves (W1 below) = 3,080
    Pre acq reserves (60% x 11,260) (per Q) = 6,756

    W1
    The fair value adjustment is the difference between the fair value and the book values on acquisition (see further information in the Q). The non current assets were uplifted by 2,500 on acquisition but only 60% is attributable to the parent - hence 1,500.

    W2
    Post acquisition reserves are calculated as the difference between the retained earnings balance at the date of acquisition (the pre acquisition reserves) in the further information in the Q i.e. 11,260. Compare this to the retained earnings in the balance sheet of the sub (14,340) then the difference is post acquisition profits of 3,080. 60% of the post acq profits gets added to the consolidated retained earnings figure because these profits were generated after the parent bought the sub.

    The total value of the net assets acquired of the subsidiary total 17,256. The parent has paid 32,000 for net assets worth 17,256 giving rise to goodwill of 14,744 (goodwill being essentially a 'balancing figure').

    The directors have said in the further information that the goodwill has suffered impairment by 25% therefore (14,744 x 25/100) = 3,686. This reduces the goodwill carrying value in the consolidated balance sheet and also reduces retained earnings, representing the debit to the income statement.

    I hope that helps.

    Regards
    Steve
    Hi Steve
    this is the first time I use this forum and not sure you will get this question but I can only try. Any way . I am doing, too the DFS JUNE 08 QUESTIONS and although I have the answers with me I cannot get where or how the get a profit of £448.
    The task is part C task 1.6 Reconciliation of profits from operations to net cash from operating activies: THE GAIN ON DISPOSAL OF PROPERTY of £448.
    In page 9 of the Exam question paper for EIGG LTD they state that:
    The total depreciation charge for the year was 4,458,000
    Property, plant and equiment costing 878,00 with accumulated depreciation of 334,00 was sold in the year.
    How they reached to a gain of 448 ( I have left the 000 out)
  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
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    Maria24 wrote: »
    How they reached to a gain of 448 ( I have left the 000 out)

    the £448 of gain is in the question, inside the income statement!
  • Maria24
    Maria24 Registered Posts: 7 New contributor 🐸
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    thanks , I am blind!! I need to check better my questions!
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