Reference no: EM133185545
Question - On 1st January 2020, Jacob acquired 60% of the Equity share capital of Sophy. The summarized financial statements of both companies are as follows:
Income Statement for the year ended 31st December 2020:
|
|
Jacob ($'000)
|
Sophy ($'000)
|
|
Revenue
|
80,000
|
40,000
|
|
Cost of Sales
|
60,000
|
22,000
|
|
Gross Profit
|
20,000
|
18,000
|
|
Distribution Cost
|
2,000
|
2,000
|
|
Administrative Cost
|
6,000
|
3,000
|
|
Finance Cost
|
1,000
|
400
|
|
Profit before Tax
|
11,000
|
12,600
|
|
Income Tax Expense
|
(4,000)
|
(1,000)
|
|
Profit for the year
|
7,000
|
11,600
|
Statement of Financial Position as at 31st December 2020
|
Assets
|
$'000
|
$'000
|
|
Non-Current Asset
|
|
|
|
Property, Plant and Equipment
|
40,000
|
12,000
|
|
Investment
|
10,000
|
|
|
Current Asset
|
13,000
|
12,600
|
|
Total Assets
|
63,000
|
24,600
|
|
|
|
|
Equity and Liabilities
|
|
|
|
Equity Shares of $1 each
|
13,000
|
4,000
|
|
Retained Earnings
|
40,000
|
15,600
|
|
53,000
|
19,600
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
10% Loan
|
3,000
|
2,000
|
|
|
|
|
Current Liabilities
|
7,000
|
3,000
|
|
Total Equity and Liabilities
|
63,000
|
24,600
|
The following information is relevant:
(i) At the date of acquisition, the fair values of Sophy assets were equal to their carrying amounts with the exception of an item of Plant, which had a fair value of $4 million in excess of its carrying amount. It had a remaining life of 5 years at that date.
(ii) Sales from Sophy to Jacob in the post-acquisition period were $6 million. Cost of these goods were $4 million. 80% of these goods were still in inventory.
(iii) Sophy trade receivables at 31st December 2020 included $400,000 due from Jacob.
Required -
(a) Prepare the Consolidated statement of Profit or Loss for the year ended 31st December 2020.
(b) Prepare the Consolidated statement of Financial Position for Jacob as at 31st December 2020.