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ACCA · Question 37 · Preparing simple consolidated financial statements
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
What is the value of CyberNetix Ltd's net assets at the date of acquisition? (Enter numbers only)
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
What is the value of CyberNetix Ltd's net assets at the date of acquisition? (Enter numbers only)
How to approach this question
Add the share capital and retained earnings of the subsidiary at the date of acquisition.
Full Answer
Net assets at acquisition = Share capital ($100,000) + Retained earnings at acquisition ($200,000) = $300,000.
Common mistakes
Including the post-acquisition profit in the acquisition date net assets.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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