AF5111 Accounting for Corporations : Assets and Liabilities


The following additional information is available:
1. South Ltd has 150 million ordinary shares and 45 million preference shares in issue. There has been no change in the number of issued shares for the company.
2. On 1 January 2019 North Ltd purchased 90 million ordinary shares in South Ltd paying a total of $120 million. The retained profits of South Ltd on 1 January 2019 were $30 million.
3. All the assets and liabilities of South Ltd were reported on its balance sheet at fair values as at 1 January 2019 except for a machine, with a remaining useful life of 5 years, whose fair value exceede its carrying amount by $10 million.
4. Since 1 January 2019 impairment test on goodwill indicated that goodwill impaired by $2 million by 31 December 2021.
5. South Ltd declared dividend on 1 December 2021 at the following rate: Ordinary dividend – $0.1 per shares Preference dividend – $0.2 per shares.
North Ltd has not accounted for the dividend receivable from South Ltd.
6. During the year ended 31 December 2021 North Ltd sold inventory to South Ltd for $25 million. North Ltd earned a uniform margin of 40% on these sales. During the year ended 31 December 2021 South Ltd resold 80% of this inventory. On 31 December 2021 South Ltd had unpaid invoices totalling $18 million payable to North Ltd in respect of these purchases.
7. Each ordinary share in South Ltd carries one vote and there are no other voting rights in the company.
8. Non-controlling interest is valued at proportionate share of the subsidiary’s identifiable net assets. 
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