ExpertACCA · Question 48 · 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.
If CyberNetix had sent a cheque for $5,000 to TechNova on 30 Dec 20X5, which TechNova did not receive until 3 Jan 20X6, how is this 'cash in transit' handled on consolidation?
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.
If CyberNetix had sent a cheque for $5,000 to TechNova on 30 Dec 20X5, which TechNova did not receive until 3 Jan 20X6, how is this 'cash in transit' handled on consolidation?
Answer options:
Ignore it until the next financial year
Add $5,000 to consolidated cash and deduct $5,000 from TechNova's receivables before eliminating the intra-group balance
Deduct $5,000 from consolidated payables
Add $5,000 to consolidated inventory
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