On 1 January 20X9, JB Enterprises acquired 70 per cent of the shares of Good Company. The separate condensed statements of financial position of JB Enterprises and of Good Company immediately after the acquisition appeared as shown below: (all amounts in €) JB Good Company Assets Property, plant and equipment (net) 18.750.000 2.600.000 Investment in Good Company 3.600.000 - Inventories 1.000.000 740.000 Cash 13.550.000 560.000 Trade and other receivables 4.400.000 660.000 41.300.000 4.560.000 Equity and Liabilities Share capital 10.000.000 2.000.000 Reserves 16.200.000 1.600.000 Profit for the year 20X4 1.600.000 240.000 Provisions 100.000 250.000 Current liabilities 13.400.000 470.000 41.300.000 4.560.000 Additional information (at acquisition date): The fair value of Good Company’s production equipment (with a remaining useful life of 3 years) implies a surplus value of €120,000 over its carrying amount. Good Company owns a trademark which is not recognized in its financial statements; the estimated fair value of the trademark amounts to €650,000. The fair value of Good Company’s inventories is estimated at €960,000. Good Company underestimated its product warranty provision by €50,000; this should be accounted for as a fair value adjustment at acquisition date. Required: Prepare the consolidated statement of financial position of the JB Group as at 1 January 20X9.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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On 1 January 20X9, JB Enterprises acquired 70 per cent of the shares of Good Company.

The separate condensed statements of financial position of JB Enterprises and of Good Company immediately after the acquisition appeared as shown below: (all amounts in €)

	JB	Good Company
Assets Property, plant and equipment (net)	18.750.000	2.600.000
Investment in Good Company	3.600.000	-
Inventories	1.000.000	740.000
Cash	13.550.000	560.000
Trade and other receivables	4.400.000	660.000
	41.300.000	4.560.000
Equity and Liabilities Share capital	10.000.000	2.000.000
Reserves	16.200.000	1.600.000
Profit for the year 20X4	1.600.000	240.000
Provisions	100.000	250.000
Current liabilities	13.400.000	470.000
	41.300.000	4.560.000

Additional information (at acquisition date):

The fair value of Good Company’s production equipment (with a remaining useful life of 3 years) implies a surplus value of €120,000 over its carrying amount.
Good Company owns a trademark which is not recognized in its financial statements; the estimated fair value of the trademark amounts to €650,000.
The fair value of Good Company’s inventories is estimated at €960,000.
Good Company underestimated its product warranty provision by €50,000; this should be accounted for as a fair value adjustment at acquisition date.

Required:

Prepare the consolidated statement of financial position of the JB Group as at 1 January 20X9.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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