Exam 25: Financial Instruments

Jiminez Limited acquired 80% of the share capital and reserves of Mustang Limited for £180 000. Share capital was £100 000 and reserves amounted to £50 000. All assets and liabilities were recorded at fair value except buildings which was recorded at £10 000 below fair value. The fair value of the NCI at the date of Jiminez's acquisition was £35 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the goodwill recorded in relation to this business combination amounts to:

A Ltd holds a 60% interest in B Ltd. On 1 July 2014 B Ltd transferred a depreciable non-current asset to A Ltd at a profit of £5000. The remaining useful life of the asset at the date of transfer was 4 years and the tax rate is 30%. The impact of the above on the NCI share of profit for the year ended 30 June 2015 is:

When preparing a set of consolidated financial statements, the pre-acquisition entry relates to:

A NCI is entitled to a share of: I Equity of the parent at acquisition date II Current period profit or loss of the subsidiary entity III Changes in equity of the subsidiary since acquisition date and the beginning of the financial period IV Equity of the subsidiary at acquisition date

A Ltd holds a 60% interest in B Ltd. B Ltd sells inventory to A Ltd during the year for £10 000. The inventory originally cost £7000. At the end of the year 50% of the inventory is still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction is a debit of:

A NCI in a subsidiary entity is entitled to a share of the following items: I II III IV Subsidiary equity at acquisition date Yes Yes Yes Yes Changes in equity since acquisition date Yes No No Yes Changes in equity of the current period No Yes No Yes