10. Consolidated SOFP 2

Question 1

How do you account for Items in transit

Answer 1

Debit Cash (increase)
Credit Intra-group recievables (decrease)

Question 2

How do you account for goods recidved by intra group buyer

Answer 2

Debit Inventories (InCREASE)
Credit Intra-group recievables (Increase)

Question 3

How do you account for unrealised profit (PUP)

Answer 3

Debit Retained Earnings of Seller ( Decrease)
Credit Consolidated Inventories (Decrease)

Question 4

When is NCI affected due to unrealised profiuts

Answer 4

Unrealised profits should be eliminated from the company whcih sold the good

• If Parent sold goods then all the unrealised profits will be eliminated
• If subsidiary sold goods, only group share of the unrealised profit is eliminated
• The rest will go to NCI workigns

Question 5

How do you work out mark up on cost

Answer 5

Mark up is added to the total cost incurred
As a percentage of the cost
Revenue x
Cost of sales (x)
Gross profit x

Question 6

How do you calculate gross margin jk

Answer 6

Difference between revenue and cost of sales divided by revenue
As a [ercentage of selling price

Question 7

What is calculation of goodwill

Answer 7

Fair value of consideration transferred
Add NCI
Less Fair value of identifiable net assets at aquisitions

= Goodwill

Question 8

Defie fair value

Answer 8

The price that would be recieved to sell an asset or paid to. transfer liability between market participantd

Question 9

What is the treatment when consdideration is deferrerd

Answer 9

Discount to present value to measure its fair value

Show aas a liability in SOFP

Question 10

What is the treatment if consdieration is contingent

Answer 10

Measure at fair value
Show as liability if cash to be paid
Show as equity if shares to be issued

Subsequent measurement:
- Adjust good will if additional information gained
-Any other changes in liability can be measured to P/L
- Any changes to equity is not adjusted

Question 11

What is continget consideration

Answer 11

Cash or shares to be paid in the future if specific events occur

Question 12

What is an identifiable asset

Answer 12

According to IAS 38
- Is Separable
- Arises from contractual or other legal rights

Question 13

How are intangible assets recognised

Answer 13

Internally generated cannot be capitalised

however when purchased in group - it is now external so should be recognised separate to goodwill

Question 14

What is the proforma for fair value adjustment workign

Answer 14

Inventories
PPE
Intangible assets
(Contingent Liabilities)