Page 550 - F2 Integrated Workbook STUDENT 2019
P. 550

F2: Advanced Financial Reporting




               11.5 B

                     The dividend would not have affected Simon’s statement of  profit or loss.
                     Dividends paid are taken out of retained earnings and do not impact profits. No
                     adjustment needs to be made for the dividend paid from Paul’s share of
                     Simon’s profits.

                     The profit needs to be time-apportioned for the six months of ownership, with
                     the impairment of $15,000 then deducted.

                     Share of profits from associate = 40% x ($450,000 x 6/12) – $15,000 = $75,000


               11.6 C

                     Poppy owns 30% of Sunflower’s shares, which is 60,000 shares (30% of
                     Sunflower’s 200,000 shares).

                     As Poppy gave 1 share away for every 4 purchased, Poppy gave 15,000 shares
                     away. These had a market value of $5 and were worth $75,000.

                     After that Poppy must include 30% of Sunflower’s post acquisition movement in
                     net assets. Sunflower has made a post-acquisition loss of $50,000 (net assets
                     at acquisition were $600,000 [$200,000 share capital plus $400,000 retained
                     earnings] and net assets at 31 December 20X6 were $550,000). Therefore
                     Poppy’s share is a $15,000 loss (30%).

                     Investment in associate

                     Cost of investment (15,000 × 5)                                 75,000
                     P’s % of A’s movement in net assets                            (15,000)
                     (30% × (550 – (200+400)) = 30% × (50)                       ––––––––

                                                                                     60,000
                                                                                 ––––––––

























               542
   545   546   547   548   549   550   551   552   553   554   555