Ican 2024 Financial Reporting Question 2

The following are the statements of financial position of Sokoto Nig. PLC and Niger Nig. LTD for the year ended October 31, 2023. Sokoto Nig. PLC Niger Nig. LTD. N’000 N’000 Non-current assets: Plant and machinery 2,600 560 Furniture and fittings 1,600 400 4,200 960 Investment: Shares in Niger. Nig. LTD at cost 1,600 - Current assets: Inventories at cost 1,760 560 Trade receivables 1,160 840 Cash and cash equivalents 800 - 3,720 1,400 Total assets 9,520 2,360 Equity and liabilities: Equity: N1 ordinary shares 5,600 1,360 Retained earnings 1,720 400 7,320 1,760 Current liabilities: Trade payables 2,200 440 Bank overdraft - 160 2,200 600 Total equity and liabilities 9,520 2,360 Additional information: i. Sokoto Nig. PLC purchased 70% of the issued ordinary share capital of Niger Nig. LTD four years ago, when the retained earnings of Niger Nig. LTD were N160,000. There had been no impairment of goodwill. ii. For the purpose of the acquisition, plant and machinery in Niger Nig. LTD with carrying amount of N400,000 was revalued to its fair value of N480,000. The revaluation was not recorded in the accounts of Niger Nig. LTD. Depreciation is charged at 20% using the straight-line method. iii. Sokoto Nig. PLC sells goods to Niger Nig. LTD at a mark-up of 25%. At October 31, 2023 the inventories of Niger Nig. LTD included N360,000 of the goods purchased from Sokoto Nig. PLC. --- PAGE BREAK --- iv. Niger Nig. Ltd owes Sokoto Nig. PLC N280,000 for goods purchased and Sokoto Nig. PLC owes Niger Nig. LTD N120,000. v. It is the group policy to value non-controlling interests at fair value. vi. The market price of the shares of the non-controlling shareholders just before the acquisition was N1.50 per share.