Reference no: EM132644985

The following are the statements of financial position of Pelhams Ltd and Selbourne Ltd as at 30 June 2019.

                                            Pelhams Ltd                   Selbourne Ltd

Non-Current Assets :

Land                                         4,500                            2,500

Plant and Equipment                     2,400                            1,750

Investments                               8,000                                  0

Current assets                           14,900                            4,250

Inventory                                    3,200                                 900

Receivables                                1,400                                 650

Bank                                          600                                    150

                                                 5,200                              1,700

TOTAL ASSETS                              20,100                            5,950

Equity and Liabilities

Equity ordinary capital-                      5,000                            1,000

Retained earnings                              8,300                           3,150

                                                    13,300                          4,150

Liabilities

Non- Current liabilities

8% Loan notes                                    4,000                         500

Current Liabilities                                  2,800                       1,300

Total Eq & Liabilities                              20,100                          5,950

Additional information:

Note 1

Pelhams Ltd acquired 75% of Selbourne Ltd on 1 July 2016 when the balance on Selbourne Ltd Retained Earnngs was N$1 150. Pelhams paid N$3 500 for its investment in the share capital of Selbourne. At the same time Pelhams invested in 60% of Selbourne's Loan stock.

Note 2

At the reporting date Pelhams recorded a payable to Selbourne of N$400. This did not agree to the corresponding amount in Selbourne's financial Statements of N$500. The difference is explained as cash in transit.

Note 3:

At the date of acquisition, it was determined that Selbourne's land, carried at a cost of N$2 500 had a fair value of N$3 750. Selborne's plant was determined to have a fair value of N$500 in excess of its carrying value and had a remaining life of 5 years at this time. These values had not been recorded by Selbourne Ltd.

Note 4:

The Pelhams group uses the fair value method to value the Non- Controlling interest. For this purpose, the subsidiary share price at the date of acquisition should be used. The subsidiary share price at acquisition was N$2, 20 per share.

Note 5:

Goodwill has impaired by N$100

Required:

Question 1: Prepare the Consolidated Statement of Financial Position as at 30 June 2019 25

Question 2: Discuss the difference between deferred consideration and contingent consideration