6 The following are the summarised financial statements of Cygnus plc and Messier plc for the financial years ended 31 March 2020: Income Statements for the year ended 31 March 2020 Messier plc Cygnus plc 000 19,640 000 11,220 (11,390) (6,840) 8,250 (1,568) 4,380 (1,489) 850 150 Revenue Cost of sales Gross profit Operating expenses Investment income Interest receivable Finance charges Net profit before taxation Taxation Profit for the year 141 75 (185) (130) 7,488 2,986 (960) (2,250) 5,238 2,026 Statements of Financial Position as at 31 March 2020 Cygnus plc Messier plc 000 000 ASSETS Non-current assets Intangible assets Tangible assets Investments, at cost 445 24,060 3,110 36,800 20,500 60,410 860 25,365 Current assets Inventory Trade and other receivables Cash and cash equivalents 2,190 2,100 1,060 5,350 65,760 1,630 1,320 900 3,850 29,215 Total assets EQUITY and LIABILITIES Equity Ordinary shares of 1 Retained earnings 40,000 21,573 61,573 18,000 7,195 25,195 Non-current liabilities Redeemable preference shares Loans 0 1,100 1,100 1,100 1,330 2,430 Current liabilities Trade and other payables Current taxation 1,180 1,507 1,580 410 3,087 65,760 1,590 29,215 Total equity and liabilities The following additional information is available: The ordinary shares in Messier plc each carry one vote and there are no other voting rights in Messier plc other than those attaching to the ordinary shares. Cygnus plcpurchased 60% of the ordinary shares in Messier plcon 1 April 2018. The purchase consideration was 20,000,000. Messierple's balance sheet at 1 April 2018 reported retained earnings of 5,889,000. All the assets recognised in Messier plc's Statementof Financial Position as at 1 April 2018 were agreed to bereportedattheirfairvalues. Messierplc also has internally generated digital rights which have not been recognised in its financial statements. It was agreed that the fair value of these digital rights was 1,000,000 as at 1 April 2018 and 870,000 as at 31 March 2020. The goodwill arising on the acquisition of Messier plc was 2,711,000 and the fairvalue of the non-controlling interestin Messier plcon the acquisition date was agreed to be 7,600,000. On 1 September 2018 Cygnus plc made a loan of 410,000 to Messier plc. The loan is repayable in one lump sum in 2023. The loanbears interest at 10% a year and all interest due on the loan has been paid. The 6% redeemable preference shares in Messier plc are to be treated as debt and the preference dividend treated as loan interest. During the year ended 31 March 2020 Cygnus plc sold inventory costing 810,000 to Messier plc for 1,350,000. On 31 March 2020 Messier's inventory figure included270,000 for thesegoods. The original costofthese goods to Cygnus plc was 162,000. On 31 March 2020 Messier plchad outstanding invoices payable to Cygnus plc of 244,000. During the year ended 31 March 2020 the companies made the following dividend payments: Cygnusplc2.5pence pershare Messier plc4 pencepershare Messier also paid the 6% dividend on its redeemable preference shares. Required a) Prepare the consolidated statement of profit or loss for Cygnus plc forthe yearended 31 March 2020. Showallsupportingworkings clearly. (22 marks) b) Preparethe consolidated statement offinancial position for Cygnus plc as at 31 March 2020. Show all supporting workings clearly. (27 marks) c) Show how the goodwill figure of 2,711,000 arising on acquisition was calculated. (6 marks) d) Discuss how Cygnus plc's treatment ofthe financial statements of Messier plcwould have been different if Cygnus plc had purchased only 4,500,000 shares in Messier plc on 1 April 2018. (5 marks) Total 60 marks 6 The following are the summarised financial statements of Cygnus plc and Messier plc for the financial years ended 31 March 2020: Income Statements for the year ended 31 March 2020 Messier plc Cygnus plc 000 19,640 000 11,220 (11,390) (6,840) 8,250 (1,568) 4,380 (1,489) 850 150 Revenue Cost of sales Gross profit Operating expenses Investment income Interest receivable Finance charges Net profit before taxation Taxation Profit for the year 141 75 (185) (130) 7,488 2,986 (960) (2,250) 5,238 2,026 Statements of Financial Position as at 31 March 2020 Cygnus plc Messier plc 000 000 ASSETS Non-current assets Intangible assets Tangible assets Investments, at cost 445 24,060 3,110 36,800 20,500 60,410 860 25,365 Current assets Inventory Trade and other receivables Cash and cash equivalents 2,190 2,100 1,060 5,350 65,760 1,630 1,320 900 3,850 29,215 Total assets EQUITY and LIABILITIES Equity Ordinary shares of 1 Retained earnings 40,000 21,573 61,573 18,000 7,195 25,195 Non-current liabilities Redeemable preference shares Loans 0 1,100 1,100 1,100 1,330 2,430 Current liabilities Trade and other payables Current taxation 1,180 1,507 1,580 410 3,087 65,760 1,590 29,215 Total equity and liabilities The following additional information is available: The ordinary shares in Messier plc each carry one vote and there are no other voting rights in Messier plc other than those attaching to the ordinary shares. Cygnus plcpurchased 60% of the ordinary shares in Messier plcon 1 April 2018. The purchase consideration was 20,000,000. Messierple's balance sheet at 1 April 2018 reported retained earnings of 5,889,000. All the assets recognised in Messier plc's Statementof Financial Position as at 1 April 2018 were agreed to bereportedattheirfairvalues. Messierplc also has internally generated digital rights which have not been recognised in its financial statements. It was agreed that the fair value of these digital rights was 1,000,000 as at 1 April 2018 and 870,000 as at 31 March 2020. The goodwill arising on the acquisition of Messier plc was 2,711,000 and the fairvalue of the non-controlling interestin Messier plcon the acquisition date was agreed to be 7,600,000. On 1 September 2018 Cygnus plc made a loan of 410,000 to Messier plc. The loan is repayable in one lump sum in 2023. The loanbears interest at 10% a year and all interest due on the loan has been paid. The 6% redeemable preference shares in Messier plc are to be treated as debt and the preference dividend treated as loan interest. During the year ended 31 March 2020 Cygnus plc sold inventory costing 810,000 to Messier plc for 1,350,000. On 31 March 2020 Messier's inventory figure included270,000 for thesegoods. The original costofthese goods to Cygnus plc was 162,000. On 31 March 2020 Messier plchad outstanding invoices payable to Cygnus plc of 244,000. During the year ended 31 March 2020 the companies made the following dividend payments: Cygnusplc2.5pence pershare Messier plc4 pencepershare Messier also paid the 6% dividend on its redeemable preference shares. Required a) Prepare the consolidated statement of profit or loss for Cygnus plc forthe yearended 31 March 2020. Showallsupportingworkings clearly. (22 marks) b) Preparethe consolidated statement offinancial position for Cygnus plc as at 31 March 2020. Show all supporting workings clearly. (27 marks) c) Show how the goodwill figure of 2,711,000 arising on acquisition was calculated. (6 marks) d) Discuss how Cygnus plc's treatment ofthe financial statements of Messier plcwould have been different if Cygnus plc had purchased only 4,500,000 shares in Messier plc on 1 April 2018. (5 marks) Total 60 marks