ACCA paper f 7 financial reporting F7FR(Int) MT2A qs d08

On that date the land of Scott Inc had a fair value $100,000 higher than its book value.. The carrying value of all other net assets at the date of acquisitions were approximately equal

Monitoring Test MT2A

Financial

Reporting

F7FR-MT2A-Z08-Q

Time allowed 1.5 hours

All THREE questions are compulsory and MUST be attempted

Do NOT open this paper until instructed by the supervisor

1 The statements of financial position of Hughes Inc, Scott Inc and Auden Inc as at the 30

September 2008 are as follows:

NON CURRENT ASSETS

Cost of shares in Scott Inc 4,500

Cost of shares in Auden Inc 1,545

CURRENT ASSETS

EQUITY AND LIABILITIES

–––––– –––––– 1,700 ––––––2,350

NON CURRENT LIABILITIES

CURRENT LIABILITIES

17,825 –––––– –––––– 7,940 ––––––8,230 Additional information

(1) Hughes bought 80% of Scott Inc on 1 October 2007, when the retained earnings

were $1,300,000 On that date the land of Scott Inc had a fair value $100,000 higher than its book value The carrying value of all other net assets at the date of acquisitions were approximately equal to their fair values

(2) Hughes acquired 600,000 $1 shares in Auden on 31 March 2007 The fair value of

its assets were considered to be equal to their carrying amounts at the date of acquisition On 31 March 2007 the retained earnings of Auden were $1,800,000 (3) Included in the year-end inventory of Hughes are goods purchased from Scott at a

mark up of $100,000 In the year end inventory of Auden are goods purchased from Hughes at a mark up of $50,000 The group policy for unrealised profit is to write it off through the selling company on consolidation

(4) The non-controlling interest are valued at their proportionate share of the

subsidiary’s identifiable net assets, they are not credited with their share of goodwill At 30 September 2008 goodwill has been impaired by $380,000 in respect

of the acquisition of Scott and $45,000 in respect of the acquisition of Auden

Required:

Prepare a consolidated statement of financial position for the Hughes Group as at 30 September 2008

(19 marks)

2 Extracts from the statement of financial position of Tarantula as at 1 October 2007 is as

follows:

$000

––––––

15,000 ––––––

The draft statement of comprehensive income of Tarantula for the year to 30 September 2008

is as follows:

$000

––––––

––––––

An ordinary dividend of $300,000 was paid during the year

The earnings per share reported in last years financial statements was 28 cents

Required:

assuming there were no changes in the capital structure in the year; (3 marks)

change in capital structure was an issue of 500,000 new shares for cash on 1

change in capital structure was a 1 for 2 rights issue, on 1 July 2008, at $7 per share when the market value of the shares was $10 (IGNORE THE BONUS

(e) Tarantula had 1,200 share options outstanding at 30 September 2007 and 30

September 2008 All options are exercisable at $5 and the average market value of the shares in the year was $8

Calculate the fully diluted earnings per share assuming there were no changes

occurred in the same period

table above and the following occurred

(21 marks)

account for transactions, and describe how financial statements can be

(b) Explain the appropriate accounting treatment for the following transaction and the

entries that would appear in the statement of comprehensive income for the year ended 30 September 2008 and in the statement of financial position at 30 September

2008

Redwood imports unseasoned hardwood and keeps it for five years under controlled conditions prior to manufacturing high quality furniture In the year ended 30 September 2008 it imported unseasoned timber at a cost of $40m It contracted to sell the whole amount for $40m and to buy it back in five years time for $56.1m Compound interest table

Number

(5 marks)

(10 marks)

End of Question Paper