Case Background
Acme Manufacturing Ltd. is a listed manufacturing company that acquired 100% of Delta Innovations Ltd. on January 1, 2024 to expand its operations through vertical integration.
- Acquisition of Delta Innovations Ltd. for \$6,000,000. Delta’s net assets were fair-valued at \$5,500,000.
- PPE undervalued by \$400,000 with 10-year remaining life.
- Enacted tax rate: 25%.
- Compound financial instrument issued by Acme in 2024 for \$2,500,000 (Liability: \$2,000,000; Equity: \$500,000).
- Acme acquired PPE worth \$3,000,000 in 2024 and \$2,000,000 in 2025. Straight-line depreciation over 10 years.
- Inventory valued under FIFO.
- Selling & distribution expenses:
- Acme: 2024 = \$800,000; 2025 = \$950,000
- Delta: 2024 = \$300,000; 2025 = \$400,000
- Dividends declared:
- Acme: 2024 = \$1,200,000; 2025 = \$1,400,000
- Delta: 2024 = \$200,000; 2025 = \$300,000
- IFRS 9 expected credit loss provision of \$50,000 annually at group level.
- Intercompany sales: \$600,000 per year @ 25% markup; 25% of goods remain unsold at year-end.
Required
- Calculate:
- Goodwill on acquisition (4 marks)
- Fair-value uplift depreciation & deferred tax (4 marks)
- FIFO-based cost of sales (4 marks)
- IFRS 9 credit loss (4 marks)
- Intercompany profit elimination (4 marks)
- Prepare (with IFRS notes):
- Standalone Income Statements & Statements of Financial Position for Acme and Delta (2024 & 2025) (10 marks)
- Consolidated Income Statement & Statement of Financial Position (2024 & 2025) (20 marks)
- Group Statement of Changes in Equity (10 marks)
- Compute & comment on the following ratios for 2024 & 2025 (15 marks):
- Current Ratio
- Gross Profit Margin
- Return on Equity (ROE)
- Debt to Equity Ratio
- Basic Earnings per Share
Practice Set B
Case Background
Sigma Incorporated acquired 100% of Omega Incorporated on January 1, 2024 to build its market presence.
- Acquisition of Omega Incorporated for \$6,000,000. Omega’s net assets at fair value: \$5,500,000.
- PPE undervalued by \$400,000 (10-year life).
- Tax rate: 25%.
- Compound instrument issued by Sigma in 2024: \$2,500,000 (Liability \$2,000,000; Equity \$500,000).
- Sigma’s PPE additions: \$3,000,000 (2024), \$2,000,000 (2025); straight-line over 10 years.
- FIFO inventory.
- S&D expenses: Sigma 2024 \$800k / 2025 \$950k; Omega 2024 \$300k / 2025 \$400k.
- Dividends: Sigma 2024 \$1.2m / 2025 \$1.4m; Omega 2024 \$200k / 2025 \$300k.
- IFRS 9 ECL provision \$50,000 p.a. at group level.
- Intercompany sales \$600,000 p.a. @25% markup; 25% unsold.
Required
- Calculate:
- Goodwill on acquisition
- FV uplift depreciation & deferred tax
- FIFO cost of sales
- IFRS 9 credit loss
- Intercompany profit elimination
- Prepare:
- Standalone P&L & BS for Sigma and Omega (2024 & 2025)
- Consolidated P&L & BS (2024 & 2025)
- Statement of Changes in Equity
- Compute & comment on:
- Current Ratio
- Gross Profit Margin
- ROE
- Debt to Equity Ratio
- EPS
Practice Set C
Case Background
Pioneer Corporation acquired 100% of Nexus Technologies on January 1, 2024 as part of its growth strategy.
- Purchase price: \$6,000,000; Nexus net assets FV: \$5,500,000.
- PPE valuation uplift: \$400,000; remaining life 10 years.
- Tax rate at 25%.
- Issued compound instrument in 2024: \$2,500,000 (Liability \$2,000,000; Equity \$500,000).
- Pioneer PPE additions: \$3,000,000 in 2024; \$2,000,000 in 2025; 10-year SL depreciation.
- FIFO inventory method.
- Selling & distribution: Pioneer 2024 \$800k/2025 \$950k; Nexus 2024 \$300k/2025 \$400k.
- Dividends: Pioneer 2024 \$1.2m/2025 \$1.4m; Nexus 2024 \$200k/2025 \$300k.
- IFRS 9 ECL of \$50,000 each year.
- Intercompany sales of \$600,000 @ 25% markup; 25% remains unsold.
Required
- Calculate:
- Goodwill
- FV uplift dep’n & deferred tax
- FIFO COGS
- ECL provision
- Interco profit elimination
- Prepare:
- Standalone statements (2024 & 2025)
- Consolidated statements (2024 & 2025)
- Statement of changes in equity
- Compute & comment on:
- Current ratio
- Gross margin
- ROE
- Debt to equity
- Basic EPS