Wednesday, October 25, 2017

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.

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