question archive Question A1 The Managing Director of Pacific Plc has asked you to prepare the statement of comprehensive income and statement of financial position for the group
Question A1 The Managing Director of Pacific Plc has asked you to prepare the statement of comprehensive income and statement of financial position for the group
Subject:BusinessPrice: Bought3
Question A1 The Managing Director of Pacific Plc has asked you to prepare the statement of comprehensive income and statement of financial position for the group. The company has one subsidiary undertaking, Atlantic Ltd. The statements of comprehensive income and statements of financial position of the two companies for the year ended 31 December 2020 are set out below: Statements of comprehensive income for the year to 31 December 2020 Pacific Plc Atlantic Ltd £000 £000 Sales revenue 38,000 12,500 Cost of sales (22,600) (5,200) Gross profit 15,400 7,300 Dividend from Atlantic Ltd 500 15,900 Distribution costs (6,400) (2,800) Administrative expenses (3,900) (2,400) Profit from operations 5,600 2,100 Finance costs (560) (190) Profit before taxation 5,040 1,910 Taxation (1,500) (620) Profit for the year 3,540 1,290 Statements of Financial Position as of 31 December 2020 Pacific Plc Atlantic Ltd Assets £000 £000 Non-current assets Property, plant and equipment 5,900 2,600 Investment in Atlantic Ltd 3,100 9,000 2,600 Current assets Inventories 2,200 1,050 Trade receivables 1,800 1,440 Cash at bank 100 10 4,100 2,500 Total assets 13,100 5,100 Equity Ordinary share capital Retained earnings 8,000 1,900 9,900 3,500 500 4,000 Current liabilities Trade payables Taxation 700 2,000 1,200 400 Total equity and liabilities 3,200 13,100 1,100 5,100 The following information is relevant: i. Pacific Plc acquired 80% of the ordinary share capital of Atlantic Ltd on 1 January 2019. On that date, the retained earnings of Atlantic Ltd were £200,000. During the year, Pacific Ltd sold goods which had cost £500,000 to Atlantic plc for £700,000. Atlantic plc has sold half of these goods by the end of the year. The fair value of the non-current assets of Atlantic Ltd on 1 January 2019 exceeded their carrying amount by £100,000. This valuation has not been reflected in the books of Atlantic Ltd. iv. Pacific Plc had a trade receivable balance owing from Atlantic Ltd of £400,000 as of 31 December 2020. V. Method 1 is adopted to calculate NCI. Required: a) Prepare the consolidated income statement for Pacific Plc for the year ended 31 December 2020. (15 marks) b) Prepare the consolidated statement of financial position for Pacific Plc as of 31 December 2020. (15 marks) Total: 30 marks
