Financial Accounts Test no.1

Financial accounts Test no.1

The following statements of comprehensive income were taken from “P” Ltd and “S” Ltd for the year ended 31st December 2016.

	P Ltd	S Ltd
Turnover	150000	100000
Cost of sales	( 50000)	(45000)
Gross profit	100000	55000
Other income	20000	40000
Administration expenses	(8000)	(6000)
Distribution expenses	(7000)	(5000)
Finance cost	(5000)	(4000)
Profit before tax	100000	80000
Tax	(24000)	(20000)
Profit for the year	76000	60000
Dividend	(16000)	(25000)
Retained earnings B/F	75000	85000
Retained earnings C/D	135000	120000

 You are provided with the following information.

1.       “P” Ltd acquired 80% of equity shares in “S” Ltd on 1st January 2014 when the retained earnings of “S” Ltd were Rs:25,000/=

2.       “P” Ltd sold Rs:60,000/=  worth of goods to “S” Ltd during the year and “P” Ltd keeps a markup of 25% on cost. However there were inventories of Rs:30,000/=  and Rs:25,000/=  respectively in “S” Ltd as at 1st January 2016 and 31st December 2016.

3.       “P” Ltd’ s  other income includes the  dividend income received from “S” Ltd for the year ending 31st December 2016.

4.       On the acquisition date, the fair value of assets were noted as follows.

Assets                                                   Carrying value                                   Fair value

Plant                                                      30000                                                    60000

Machinery                                          35000                                                    55000

5.       The plant had a life time of 6 years and machinery had a life time of 5 years as at the acquisition date. And also the plant that recognized at the fair value in the acquisition date was sold during the year of 2015 at RS:100,00/=. Both depreciations are charged to cost of sales.

You are required to prepare the consolidated income statement and statement of changes in equity for the year ending 31st December 2016.