Swing purchased 80% of Cat's equity on 1 January 20X7 for $120,000 when Cat's retained earnings were $50,000. The fair value of the non-controlling interest on that date was $40,000. During the year, Swing sold ‘goods which cost $80,000 to Cat, at an invoiced cost of $100,000. Cat had 50% of the goods sti inventories at the year end. The two companies’ draft financial statements as at 31 December 20X8 are shown below. STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X8 Swing Cat $000 000 Revenue 5,000 1,000 Cast of sales 2,900 600 Gross profit Z100 400 Other expenses 1,700 320 Net profit, “A008 a0 Income tax 130 25 Profit for the year 7370 Ts ‘STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 20X8 Swing Cat $000 000 Non-current assets Investment in Cat 120 _ Tangible non-current assets 1,880 200 2000 20 ‘Current assets Inventory 500 120 Trade receivables 650 40 Bank and cash 390 6 T 540 135 3540 35 Equity Share capital 2,000 100 Retained earnings 400 200 2,400 300 Current liabilities Trade payables 310 30 Tax 230 65 Tao 5 E540 msTask 1 ‘Complete the following ta determine goodwill at acquisition ‘Consideration transferred on acquisition Fair value of non-controlling interest (Add / Subtract Total cost of investment | Fair value of net assets at acquisition: Equity share capital Retained earnings rr J Total net assets C] ‘Goodwill | (4 marks) Task 2 ‘What is the amount of the adjustment for unrealised profit on inventory? sc] (15 marks) Task 3 ‘What will be consolidated cost of sales at 31 December 20X8? sl (2.5 marke} Task 4 ‘Which TWO of the following statements conceming the non-controlling interest are correct? (71 Non-controling interest describes shares in the consolidated entity not held by the parent (C1 Won-controling interest describes shares in the subsidiary nat held by the parent [1 20% of Swings consolidated retained eamings will be allocated to the non-contraliing interest [1] 20% cf cats profit after tax will be allocated to the non-controlling interest (2 marks) Task 5 ‘Complete the following to determine consolidated retained earings Swing cat $000 000 Per question Adjustment ‘Add/subtract Pre-acquisition retained earnings ‘Add/subtract Total Group share of Cat ‘Group retained earnings (5 marks)