The income statements for the year ended 31 December 2020 and the statements of financial position as at 31 December 2020 for Garden Plc, Leaf Ltd and Flower Ltd are given as follows:
Statements of financial position as at 31 December 2020
|
Garden Plc |
|
Leaf Ltd |
|
Flower Ltd |
||
|
£’000 |
|
£’000 |
|
£’000 |
||
| Investments |
30,100 |
– |
– |
|||
| Property, plant and equipment |
5,100 |
24,300 |
6,800 |
|||
| Inventory |
2,700 |
4,100 |
2,500 |
|||
| Other current assets |
3,500 |
3,000 |
2,500 |
|||
| Total assets |
41,400 |
31,400 |
11,800 |
|||
| Share capital |
6,500 |
2,000 |
900 |
|||
| Retained Earnings |
25,650 |
13,550 |
9,300 |
|||
| Revaluation reserve |
– |
1,350 |
– |
|||
| Payables |
9,250 |
14,500 |
1,600 |
|||
| Equity and reserves |
41,400 |
31,400 |
11,800 |
Income statements for the year ended 31 December 2020
|
Garden Plc |
|
Leaf Ltd |
|
Flower Ltd |
||
|
£’000 |
|
£’000 |
|
£’000 |
||
| Turnover |
26,100 |
18,900 |
10,200 |
|||
| Cost of sales |
(5,400) |
(8,100) |
(2,200) |
|||
| Gross profit |
20,700 |
10,800 |
8,000 |
|||
| Operating expenses |
(4,470) |
(4,400) |
(800) |
|||
| Profit before tax |
16,230 |
6,400 |
7,200 |
|||
| Tax |
(3,480) |
(1,800) |
(900) |
|||
| Profit after tax |
12,750 |
4,600 |
6,300 |
|||
Notes
Garden Plc acquired 75% of Leaf Ltd on 1 January 2015 for £15,200,000 when the share capital and reserves of Leaf Ltd were £8,100,000. At the date of acquisition, the fair value of Leaf Ltd’s non-current assets was £24,300,000. Leaf Ltd has accounted for this revaluation. No changes to the share capital and non-current assets of Leaf Ltd have taken place since acquisition.
Garden Plc acquired 30% of Flower Ltd on 1 January 2017 for £5,400,000 when the share capital and reserves of Flower Ltd were £1,900,000. No changes to the share capital of Flower Ltd have taken place since acquisition.
Goodwill for all acquisitions is capitalised. Impairment of 15% is to be recognised against the goodwill of Flower Ltd in 2020.
In 2020 Leaf Ltd sells inventory which cost £450,000 to Garden Plc for £700,000. 20% of the inventory remains with Garden Plc at the end of 2020.
At the year end, Garden Plc charges both Leaf Ltd and Flower Ltd a management fee of 10% of turnover. None of the companies have accounted for this management fee and the management fee has not been paid or received at the year end.
Leaf Plc revalues its non-current assets at the end of 2020 by £800,000 but has not yet accounted for this revaluation.
Required
Prepare the consolidated income statement for the year ended 31 December 2020 up to profit after tax and the consolidated statement of financial position as at 31 December 2020 for Garden Plc.
You do NOT need to calculate the non-controlling interest in the income statement or the retained profit brought forward in the income statement.
Total 20 marks
