Question

Sultan Co purchased 50% of the shares and voting rights of Halim Inc. for US$225m, along...

  1. Sultan Co purchased 50% of the shares and voting rights of Halim Inc. for US$225m, along with a controlling position on Halie’s Board of Directors. The deal was completed on 31 January 2020. At the time of the acquisition, Halime had net assets with a book value of US$190m and a fair value of $250m. Sultan follows IFRS.

For the consolidated financial statements prepared by Sultan at the acquisition date:

  1. What is the amount that would be shown for Goodwill in the consolidated financial statements at time of purchase? [3 marks]
  2. What is the amount that would be shown for the Non-controlling Interest in the consolidated financial statements at time of purchase? [2 marks]
  3. Compute the figures to be included in the consolidated balance sheet of Sultan Co as at 31 January 2020 from the following period end figures. The Halime-Individual figures show the figures as per the Balance Sheet (BS*) and the Fair Value (FV*) in the table below. [6 marks]

Sultan-

Individual

Halime-

Individual

Sultan-

Conslidated

31-Jan-20 [USD millions]

BS (FV*)

Cash at bank

35

2

A/c receivable

20

40

Prepayments

7

8

Other Investments

1,080

0

Investment in Halime

225

n/a

Inventory

8

65 (90*)

Land and Buildings

700

10 (30*)

PPE

40

95 (110*)

Goodwill

n/a

n/a

2,115

220

Accounts payable

15

10

Short-term debt

150

20

Long-term debt

750

0

Common Stock

500

100

Retained Earnings

700

90

Non-controlling interest

0

n/a

2,115

220
Business   Accounting   
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Homework Answers

Answer #1

a)Goodwill to be recognised at the time of purchase is cost of acquisition - Fair value of the assets acquired, if the figure is negative then the excess assets recieved must be credited to capital reserve

In the given case 50% have been purchased by Sultan co, for $225 million, and the Fair Value of net assets are $250million

Goodwill=$225million-($250million*50%)=$100million

b)Non Controlling Interest=$250million*50%=$125million

c) COSOLIDATED BALANCE SHEET OF SULTAN AND CO. AS AT 31 JAN 2020.

ASSETS
Cash at bank 37
A/c receivable 60
Prepayments 15
Other Investments 1080
Inventory 98
Land and Buildings 730
PPE 150
Goodwill 100
Total 2270
Liabilities AND Equity
Accounts payable 25
Short-term debt 170
Long-term debt 750
Common Stock 500
Retained Earnings 700
NCI 125
Total 2270
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