GH¢1,000 and one-half remained in inventory at the year end.
Solution
The amount of unrealised profit can be computed as follows
20% × 1,000 × 0.50 = GH¢100 This amount is to be deducted from combined inventories in the consolidated statement of financial position, and added to the group cost of sales of. Debit (GH¢) Credit (GH¢) Cost of Sales
100
Inventories
100
Being unrealised profit eliminated
JAY: How do I adjust for fair values of assets?
KO: STEP 4: ADJUST FOR FAIR VALUES OF ASSETS
According to IFRS 3 (Revised, during acquisition, the investee’s assets ought to be revalued to their fair values to reflect the fair values. Extract (4) from the Comprehensive Question i. Victory acquired 6,250 shares of Comfort Ltd in 2005 at a total cost of GH¢12,000. This acquisition gives Victory Ltd significant influence over Comfort Ltd. At the date of acquisition, Comfort Ltd’s retained earnings had a balance of GH¢4,300. The fair
values of Comfort Ltd’s assets and liabilities approximated their carrying amounts. ii. On 1 January, 2012, Victory Ltd acquired 32,000 of Happy Ltd’s shares at a total cost of GH¢29,000. At the date of acquisition, Happy Ltd’s retained earnings had a balance of GH¢3,500. The fair values of the assets and liabilities approximated their carrying
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