ACCA · Question 47 · Preparing Simple Consolidated Financial Statements
Section B - Case 1
Scenario: GlobalTech PLC acquired 80% of CloudServe Ltd on 1 July 20X5. Year-end is 31 December 20X5. GlobalTech paid $5m cash and issued 1m shares (market value $2 each). CloudServe's net assets at acquisition were $6m. Fair value of NCI at acquisition was $1.5m. Post-acquisition, CloudServe sold goods to GlobalTech for $1m at a 25% mark-up on cost. Half of these goods remain in inventory at year-end. CloudServe's profit for the full year was $800k (accruing evenly).
At year-end, GlobalTech owes CloudServe $200,000 for the intra-group purchases. How is this treated in the consolidated statement of financial position?
Answer options:
The $200,000 is eliminated from both consolidated receivables and consolidated payables.
Only 80% ($160,000) is eliminated from receivables and payables.
It is added to consolidated inventory.
No adjustment is needed as it nets off automatically.
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