on 1st april2017 prentice acquired 60% of the equity sharecapital of sontic in a...

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Accounting

on 1st april2017 prentice acquired 60% of the equity sharecapital of sontic in a share exchange of two shares in prentice forthree in sontic.the issue of shares has not yet been recorded byprentice at the date of acquisition,shares in prentice had a marketvalue of $6 each. below are summerised draft financial statement ofboth companies.
statement of profit or loss for the year ended 30 September2017
   prentice sontic
$000 $000
   revenue 85000    42000
   cost of sales    63000 32000
   gross profit    22000 10000
distribution costs    (2000)    (2000)
administration costs    (6000)    (3200)
finace costs    (300) (400)
   profit before tax 13700 4400
   income tax (4700)    (1400)
   profit after tax 9000 3000
statement of financial position as at 30th September 2017
ASSETS
non current assets 40600 12600
property plant &equip 16000    6000
total current assets    56600    19200
   EQUITY AND LIABILITIES
   equity shares of $1    10000 4000
   returned earnings 35400 6500
   total    45400    6500
NON CURRENT LIABILITIES
   10% loan notes    3000   4000
   current liabilities 8200    4700
   total equity    56600 19200
the following information is relevant:
1. at the date of acquisition, the fair value of sontic's assetswere equal to their carrying amounts with the exception of an itemof plant which had a fair value of $2 million in excess of itscarrying amount. it had a remaining life of five years at the date(straight line method depreciation is used) sontic has not adjustedthe carrying amount of its plant as a result of the fair valueexercise
2.sales from pretice in the post acquisition period were $8million sontic made a mark up on cost of 40% on these sales.prentice had sold $5.2 million (at cost to prentice)of these goodsby 30 September 2017. 3. sontic's trade receivables at 30 September2008 include $600000 due from prentic which did not agree withprentic's corresponding trade payables. this was due to cash intransit of $200000 from prentice to sontic, both companies havepositive bank balance
3.other than where indicated , statement of profit or loss itemsare deemed to accrue evenly on a time basis 5. prentice has apolicy of accounting for any non controlling interest at fair value. the fair value of the non controlling interest at the acquisitiondate was $5.9 million
REQUIRED
(a) prepare the consolidated statement of profit or loss forprentice for the year ended 30 September 2017
(b)prepare the consolidated statement of financial position asat 30 sept 2017

Answer & Explanation Solved by verified expert

3.9 Ratings (399 Votes)

A Prentice Consolidated Income Statement for the year Ended 30 September 2017 000 Revenue85000420006128000 intra group sales 98000 Cost of sales 72000 Gross Profit 26000 Distribution Cost20002000612 3000 Admiistrative Expenses60003200612 7600 Finance Cost300400612 500 Profit Before Tax 14900 Income Tax Expense47001400612 5400 Profit For The Year 9500 Attributable to Equityholders of the parent 9300 NonControling Interest3000612800URP200depreciation40 200 9500 See Answer

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In: Accountingon 1st april2017 prentice acquired 60% of the equity sharecapital of sontic in a share...on 1st april2017 prentice acquired 60% of the equity sharecapital of sontic in a share exchange of two shares in prentice forthree in sontic.the issue of shares has not yet been recorded byprentice at the date of acquisition,shares in prentice had a marketvalue of $6 each. below are summerised draft financial statement ofboth companies.statement of profit or loss for the year ended 30 September2017 prentice sontic$000 $000 revenue 85000 42000 cost of sales 63000 32000 gross profit 22000 10000distribution costs (2000) (2000)administration costs (6000) (3200)finace costs (300) (400) profit before tax 13700 4400 income tax (4700) (1400) profit after tax 9000 3000 statement of financial position as at 30th September 2017ASSETSnon current assets 40600 12600property plant &equip 16000 6000total current assets 56600 19200 EQUITY AND LIABILITIES equity shares of $1 10000 4000 returned earnings 35400 6500 total 45400 6500NON CURRENT LIABILITIES 10% loan notes 3000 4000 current liabilities 8200 4700 total equity 56600 19200the following information is relevant:1. at the date of acquisition, the fair value of sontic's assetswere equal to their carrying amounts with the exception of an itemof plant which had a fair value of $2 million in excess of itscarrying amount. it had a remaining life of five years at the date(straight line method depreciation is used) sontic has not adjustedthe carrying amount of its plant as a result of the fair valueexercise2.sales from pretice in the post acquisition period were $8million sontic made a mark up on cost of 40% on these sales.prentice had sold $5.2 million (at cost to prentice)of these goodsby 30 September 2017. 3. sontic's trade receivables at 30 September2008 include $600000 due from prentic which did not agree withprentic's corresponding trade payables. this was due to cash intransit of $200000 from prentice to sontic, both companies havepositive bank balance3.other than where indicated , statement of profit or loss itemsare deemed to accrue evenly on a time basis 5. prentice has apolicy of accounting for any non controlling interest at fair value. the fair value of the non controlling interest at the acquisitiondate was $5.9 millionREQUIRED(a) prepare the consolidated statement of profit or loss forprentice for the year ended 30 September 2017(b)prepare the consolidated statement of financial position asat 30 sept 2017