Prepare consolidated financial statements, Financial Accounting

Chambers plc imports household equipment from Germany. On 1 July 2011, the company acquired 60% of the ordinary shares of Court Ltd, which owns a chain of retail shops selling household equipment. Draft financial statements of the two companies at 30June 2012 have been prepared as follows:

 Statements of Financial Position

                                                                                               Chambers plc                       Court Ltd

                                                                                                  £m                                           £m          

ASSETS

Non-Current Assets

Property, plant & equipment                                                         1,810                                         510

Investment in Court Ltd                                                                100                                             -

                                                                                                  1,910                                         510

Current assets

Inventory                                                                                    1,300                                         830

Trade receivables                                                                        2,125                                         430

Cash at bank                                                                                925                                         -

                                                                                                   4,350                                      1,260

Total Assets                                                                              6,260                                      1,770

EQUITY & LIABILTIES Equity

50p Ordinary shares                                                                      500                                         200

Share premium account                                                                 900                                           -       

Retained earnings                                                                       3,060                                         570

                                                                                                 4,460                                         770

Non-current liabilities

4% Debenture stock                                                                          -                                          100

Current Liabilities

Bank overdraft                                                                          -                                              150

Trade payables                                                                           1,800                                      750

                                                                                                 1,800                                         900

Total Equity & Liabilities                                                      6,260                                      1,770

 Statements of Profit or Loss

                                                                                             Chambers plc                       Court Ltd

                                                                                                  £m                                           £m        

Turnover                                                                                    15,650                                   5,664

Cost of sales                                                                               10,995                                   4,530     

Gross profit                                                                                 4,655                                    1,134

Distribution costs                                                                          2,070                                         450

Administrative expenses                                                               1,035                                       382     

Operating profit                                                                            1,550                                         302

Investment income                                                                         80                                           -

Finance costs                                                                                   -                                           11     

Profit before taxation                                                                    1,630                                       291

Taxation                                                                                        490                                         91     

Profit after taxation                                                                      1,140                                       200

 Notes

 The purchase by Chambers plc of the shares in Court Ltd was financed by the payment of 25p (£0.25) cash per share and by the issue of 1 share in Chambers for every 2 shares in Court. Only the cash component has been accounted for in the draft Statement of Financial Position of Chambers.At the time of acquisition shares in Chambers were trading at 370p per share; shares in Court were at that time valued at 180p. The balance of Court's retained earnings was £470 million on 30 June 2011. There have been no changes in the ordinary share capital of Court Ltd over the year.Chambers plc intends to use the fair value method to account for goodwill arising on acquisition.

1. When Chambers plc acquired its interest in Court, it valued that company's freehold property at £30 million above its book value. The freehold property had an average remaining useful life of 15 years at that time. Depreciation should be charged to distribution costs.

2. During the year ended 30 June 2012 Court purchased goods from Chambers for £180 million. Of these, items which had cost Court £90 million are still included in inventory at the year-end. Chambers has a margin on selling price of 30%.

3. Included in Chambers' trade receivables is a balance due from Court of £60 million. Court'strade payables include a balance of £20 million due to Chambers. On 30 June 2012 a bank transfer for £40 million had been sent by Court to Chambers. It was not received in Chambers bank account until 1st July.

4. During the year Chambers plc paid a dividend of £340 million and Court Ltd paid a dividend of £100 million. The balance of Chambers retained earnings was £2,260 million at 30th June 2011.

Required

Prepare consolidated financial statements for Chambers plc and its subsidiary as at 30 June 2012 including a Consolidated Statement of Profit or Loss, a Consolidated Statement of Changes in Equity and a Consolidated Statement of Financial Position.

Posted Date: 3/29/2013 2:24:38 AM | Location : United States







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