The balance sheets of Karlux group of companies as at 31 December 2017 are shown

Question

The balance sheets of Karlux group of companies as at 31 December 2017 are shown below: Karlux Able Baron Property, plant and equipment Investments 125400 33.300 10,000o 4,000 shares in Able 10,000 shares in Baron 36,150 13,500 Current assets Inventories Accounts receivable Bank 33,600 19,000 7.50o 26,400 10,000 12,500 13.000 15.000 10.000 234.550 90,800 40,000 Ordinary shares Retained profits 150,000 15,000 10,000 Balance at 31.12.2015 Profit for 2016 Profit for 2017 Proposed dividends 25.500 24,000 8,000 3.500 16,000 12,000 6,000 20,00o 10,000 8,000 6,000 Current liabilities Accounts payable .39.550-71800-400 234.550 90,800 40,000 Notes: 1. Karlux Ltd acquired 80 percent of Able Ltd on 31 December 2016. Able Ltd 2. Included in the plant assets of Baron Ltd are items bought from Able Ltd acquired 1o0 percent of Baron Ltd on 31 December 2015. for $800 on 1 January 2017. The net book value of these items at the time of the sale was $50o with an estimated useful life of four years. They are depreciated using the straight-line method. 3· The account receivables of Karlux Ltd and account payables of Baron Ltd 4. Karlux Ltd has not accounted for its share of post-acquisition dividend 5· The profit and loss of Karlux Ltd includes a pre-acquisition dividend of 6· The inventories of Baron Ltd include $1,000 in respect of goods invoiced include inter-company current accounts of $500. proposed by Able Ltd. $400 received from Able Ltd. to it from Able at cost plus 25 percent

Explanation / Answer

Plant property and equipment 168475

Goodwill 21950

Inventories 59900

Accounts receivable 48400

Bank 38000

Total of asset side 336725

Share 150000

Profit and loss account 105675

Minority Interest 18600

Proposed dividend 11600

Accounts payable 50850

total of liabilities side 336725

Notes on calculation:

sale of plant: sold at a profit of 300. depreciation on 300 for 1 year is 300/4=75. hence balance =225 to be deducted from plant and profit loss account.

accounts payable and receivable are deducted by 500 from total balance

profit included from inventory is 1000/125*25= 200 dedcuted from inventory as well as profit loss account

pre acquisition dividend is deducted from investment and well as from PL account

Minority interest is share capital of able plus profits of able and Baron multiplied by 20% and deducted for proposed dividend of 8000*20%=1600

Goodwill for Able = 10000+8000-13500

goodwill for Karlux= (15000+24000+16000+12000 * 80%)- 36150

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