, (Total Marks:30)
Exam Practice – Consolidation
Starlight Group – Consolidated Financial Statements
Starlight plc acquired 75% of Nebula Ltd on 1 January 2023 for:
- £10 million cash
- £3 million deferred consideration (payable on 1 Jan 2026, discounted at 6%).
- 1 million Starlight shares (market price at acquisition: £2.50/share).
At acquisition (1 Jan 2023):
- Nebula’s net assets: Book value = £8m, Fair value = £9m (includes unrecorded customer
list valued at £1m, 5-year life).
- Contingent liability (lawsuit): Fair value = £400k (settled in 2024 for £300k).
- Nebula’s retained earnings: £4m.
- NCI was measured at the proportionate share of net assets.
Additional Information (2023-2024):
1. Intra-group transactions:
- Starlight sold goods to Nebula (£1.2m, cost £800k). 25% unsold at year-end.
- Nebula sold a freehold property to Starlight for £5m (carrying amount: £3m).
2. Impairments:
- Goodwill impaired by £500k in 2024.
- Customer list impaired by £200k in 2024.
3. Foreign subsidiary:
- Nebula operates in USD ($).
- Exchange rates:
- 1 Jan 2023: £1 = $1.30
- 31 Dec 2024: £1 = $1.20
- Nebula’s post-acquisition retained earnings: $2.5m (2023: $1.8m).
Required:
1. a) Calculate goodwill at acquisition (1 Jan 2023). (6 marks)
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_______________
Prepared By Sarmad Khalid, SBR tutor For Practice only
Exam Practice – Consolidation
Starlight Group – Consolidated Financial Statements
Starlight plc acquired 75% of Nebula Ltd on 1 January 2023 for:
- £10 million cash
- £3 million deferred consideration (payable on 1 Jan 2026, discounted at 6%).
- 1 million Starlight shares (market price at acquisition: £2.50/share).
At acquisition (1 Jan 2023):
- Nebula’s net assets: Book value = £8m, Fair value = £9m (includes unrecorded customer
list valued at £1m, 5-year life).
- Contingent liability (lawsuit): Fair value = £400k (settled in 2024 for £300k).
- Nebula’s retained earnings: £4m.
- NCI was measured at the proportionate share of net assets.
Additional Information (2023-2024):
1. Intra-group transactions:
- Starlight sold goods to Nebula (£1.2m, cost £800k). 25% unsold at year-end.
- Nebula sold a freehold property to Starlight for £5m (carrying amount: £3m).
2. Impairments:
- Goodwill impaired by £500k in 2024.
- Customer list impaired by £200k in 2024.
3. Foreign subsidiary:
- Nebula operates in USD ($).
- Exchange rates:
- 1 Jan 2023: £1 = $1.30
- 31 Dec 2024: £1 = $1.20
- Nebula’s post-acquisition retained earnings: $2.5m (2023: $1.8m).
Required:
1. a) Calculate goodwill at acquisition (1 Jan 2023). (6 marks)
_________________________________________________________________________________________________________
_______________
Prepared By Sarmad Khalid, SBR tutor For Practice only
