Prepare a consolidated statement of cash flows using the


Q1. Part A - On 1 April 2012, Blue Company acquired 60% of the shares of Green Company.

The statement of comprehensive income for the year ended 31 December 2012 and statement of financial position as at 31 December 2012 are as follows:

Statement of comprehensive income for the year ended 31 December 2012

                                                                         Blue Company           Green Company

                                                                             £                                    £

Revenue                                                             240,000                     115,000

Cost of sales                                                       (120,000)                  (55,000)

Gross profit                                                         120,000                      60,000

Other income                                                         -                              20,000

                                                                          120,000                     80,000

Administrative expenses (including depreciation)     (35,000)                   (22,500)

Profit before taxation                                            85,000                      57,500

Taxation                                                              (12,000)                   (9,000)

Profit after taxation                                               73,000                      48,500

Statement of financial position as at 31 December 2012

                                                     Blue Company                            Green Company

                                                     £                        £                      £                      £

Assets

Non-current assets

Tangible assets                                                        123,000                                     75000

Investment in Green                                                60,000

Current assets Inventories          29,000                                            39,000

 Receivables                              25,000                                            20,000

 Others                                     7,500                      61,500              18,500              77500

Total assets                                                            244,500                                    152500

Equity and liabilities

Capital and Reserves

Ordinary shares                                                      125,000                                 75,000

 Retained earnings                                                  98,000                                   62,500

                                                                             223,000                               137,500

 Current liabilities

Payables                                                                21,500                                  15,000

 Total equity and liabilities                                       244,500                               152,500

Brought forward reserves                                       25,000                                  14,000

Additional information:

On 1 July 2012, Green Company sold non-current assets worth £40,000 to Blue Company for £60,000. Blue Company charges depreciation at 20% per annum. The unrealised profit on the sale of non-current assets creates 6 temporary differences. The tax rate applicable to both entities is 20%. The fair value of the non-controlling interest at the date of acquisition is £40,000.

Required: Prepare consolidated statement of comprehensive income for the period ended 31 December 2012 and consolidated statement of financial position as at 31 December 2012. Show appropriate workings for adjustments made.

Part B - Novartis AG is a Swiss multinational pharmaceutical company which prepares group financial statements. Obtain the annual report of Novartis Group for 2010 (available online on www.novartis.com) and review the information about acquisitions. This information may be provided in different parts of the annual report including financial statements. List the acquisitions made during the year.

Prepare a report which shows:

1. Your research into the reasons for success or failure of acquisitions in general.

2. Potential advantages of each of the acquisitions in 2010 for Novartis Group.

3. Impact on the consolidated financial statements of these acquisitions including adjustments to subsidiary's book values.

4. Your views about goodwill on each acquisition and subsequent goodwill impairment charges, if any

Q2. P Company purchased a 90% interest in S Company for £1,200,000 cash on 1 January 2012. S Company's statement of financial position on the date of acquisition was as follows:

                                                            £

Assets

Cash                                                     20,000

Inventory                                              280,000

Fixed assets (net)                                   1,080,000

Total assets                                            1,380,000

Liabilities and Equity

Accrued payables                                    180,000

Bonds payable                                        200,000

Ordinary shares (£10 par)                        400,000

Retained earnings                                    600,000

Total liabilities and equity                          1,380,000

The excess of consideration over book value was attributed to depreciable fixed assets with a 15-year remaining life and straight-line depreciation.

P Company issued £600,000, 20-year, 12% bonds at par value to pay for the acquisition. Consolidated net income for 2012 was £311,777.

P Company declared and paid dividends of £20,000 and S company declared and paid dividends of £10,000.

There were no purchases and sales of fixed assets during the year.

The following information was also available at the end of 2012:

P Company 31 December 2011

                                        Debits                                 Credits

                                           £                                     £

Cash                                  780,000

Inventory                           380,000

 Fixed assets                      1,500,000

 Accrued payables                                                     300,000

Bonds payable                                                          400,000

Ordinary shares (£10 par)                                         400,000

Additional paid-in capital                                           1,100,000  

Retained earnings                                                    460,000

Total                                 2,660,000                       2,660,000

Consolidated 31 December 2012

                                                 Debits                        Credits

                                                 £                               £

Cash                                          127,000

Inventory                                   908,000

Fixed assets                               2,771,110

Accrued payables                                                        222,000

 Bonds payable                                                           1,200,000

 Ordinary shares (£10 par)                                          400,000

Non-controlling interest                                               146,110

Additional paid-in capital                                             1,100,000

Retained earnings                                                      738,000

Total                                    3,806,110                      3,806,110

Required: Prepare a consolidated statement of cash flows using the indirect method for P Company and its subsidiary S Company for the year end.

Attachment:- Assignment File.rar

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