Question

In: Accounting

Rick Ltd wishes to prepare the statement of comprehensive income for the group. The company has...

Rick Ltd wishes to prepare the statement of comprehensive income for the group. The company has one subsidiary undertaking, Rock Ltd. The statements of comprehensive income the two companies for the year ended 31st December 2018 are shown below:

Statement of comprehensive income for the year ended December 31st 2018

Rick Ltd

Rock Ltd

£000

£000

Sales Revenue                        

50,000

20,000

Cost of goods sold

(20,000)

(6,000)

Gross profit

30,000

14,000

Distribution costs

8,500

4,000

Admin expenses

4,000

1,500

Operating profit

17,500

8,500

Dividends received from Beta

500

Profit before tax

18,000

8,500

Taxation

(6,300)

(3,000)

Profit for the year

11,700

5,500

Further information:

  1. Rick Ltd acquired 75% of the ordinary share capital of Rock Ltd on 31st December 2017.
  2. During the year, Rick Ltd sold goods which had cost £ 300,000 to Rock Ltd for £550,000. All of the goods had been sold by Rock Ltd by the end of the year.

Solutions

Expert Solution

Consolidated Statement of Comprehensive Income for the year ended December 31st 2018

Rick Ltd Rock Ltd Adjustments Consolidated Comprehensive Income
Sales Revenue £ 50,000.00 £    20,000.00 -£          550.00 £                          69,450.00
Cost of Goods Sold -£20,000.00 -£     6,000.00 £          550.00 -£                          25,450.00
Gross Profit £ 30,000.00 £    14,000.00 £                          44,000.00
Distribution Costs £   8,500.00 £      4,000.00 £                          12,500.00
Admin Expenses £   4,000.00 £      1,500.00 £                            5,500.00
Operating Profit £ 17,500.00 £      8,500.00 £                          26,000.00
Dividends received from beta £      500.00 £                               500.00
Profit Before Tax £ 18,000.00 £      8,500.00 £                          26,500.00
Taxation -£   6,300.00 -£     3,000.00 -£                            9,300.00
Profit for the year £ 11,700.00 £      5,500.00 £                          17,200.00
Share of Minority Interest@25% of profit -£     1,375.00 -£                            1,375.00
Amount of Consolidated P&L to be taken to BS £                          15,825.00

Since all the stock is sold by Rock ltd, there is no requirement to deduct Unrealised profit from the P&L on inter group transaction.


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