Prepare for the Earth Group: a) A consolidated income statement for the year ended 31 December 2019. b) A consolidated statement of financial position as at 31 December 2019.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The Earth Group carries on business as a distributor of warehouse equipment and importer of fruits into the country. Earth was incorporated in 2011 to distribute warehouse equipment. It diversified its activities during 2013 to include the import and distribution of fruits and expand its operations by the acquisition of shares in Mango in 2015 and in Plum in 2017. Accounts for all companies are made up to 31 December. The draft income statements for Earth, Mango and Plum for the year ended 31 December 2019 are as follows.

See figure. 

The following information is available relating to Earth, Mango and Plum.

a). On 1 January 2015 Earth acquired 2,700,000 $1 ordinary shares in Mango for $6,650,000 at which date there was a credit balance on the retained earnings of Mango of $1,425,000. No shares have been issued by Mango since Earth acquired its interest.

b). On 1 January 2017 Mango acquired 1,600,000 $1 ordinary shares in Plum for $3,800,000 at which date there was a credit balance on the retained earnings of Plum of $950,000. No shares have been issued by Plum since Mango acquired its interest.

c). During 2019, Plum had made intragroup sales to Mango of $480,000 making a profit of 25% on cost and $75,000 of these goods were in inventory on 31 December 2019.

d). During 2019, Mango had intragroup sales to Earth of $260,000 making a profit of 33-1/3% on cost and $60,000 of these goods were in inventories on 31 December 2019.

e). On 1 November 2019 Earth sold warehouse equipment to Mango for $240,000 from inventories. Mango has included this equipment in its property, plant, and equipment. The equipment had been purchased on credit by Earth for $200,000 in October 2019 and this amount in included in its current liabilities as at 31 December 2019.

f). Mango charges depreciation on its warehouse equipment at 20% on cost. It is company policy to charge a full year’s depreciation in the year of acquisition to be included in the cost of sales.

g). An impairment test conducted at the year end did not reveal any impairment losses.

h). It is the group policy to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests in Mango on 1 January 2015 was $500.000. The fair value of the 28% non-controlling interest in Plum on 1 January 2017 was $900,000.

Required 

Prepare for the Earth Group:

a) A consolidated income statement for the year ended 31 December 2019.

b) A consolidated statement of financial position as at 31 December 2019.

Earth
Mango
Plum
$'000
45,600
18,050
$'000
$'000
22,800
5,320
Revenue
24,700
Cost of sales
5,463
19,237
2,137
Gross profit
27,550
3,325
17,480
Distribution costs
1,900
1,900
Administrative expenses
3,475
950
Finance costs
Profit before tax
Income tax expenses
Profit for the year
325
20,425
8,300
16,150
13,680
5,390
4.241
12.125
10,760
9.439
Dividends paid and declared for the period
9,500
The draft statements of financial position as at 31 December 2019 are as follows:
Earth
Plum
Mango
$'000
$'000
$'000
Non-current assets
Property, Plant and Equipment (NBV)
35,483
24,273
13,063
Investments
Shares in Mango
Shares in Plum
6,650
3,800
42,133
28,073
13,063
8,883
21.946
Current asset
1,568
43,701
9,025
37.098
Equity
$1 ordinary shares
Retained earnings
8,000
3,000
2,000
19,898
22,638
24,075
30,638
27,075
21,898
13.063
43,701
10.023
37.098
Current liabilities
48
21.946
Transcribed Image Text:Earth Mango Plum $'000 45,600 18,050 $'000 $'000 22,800 5,320 Revenue 24,700 Cost of sales 5,463 19,237 2,137 Gross profit 27,550 3,325 17,480 Distribution costs 1,900 1,900 Administrative expenses 3,475 950 Finance costs Profit before tax Income tax expenses Profit for the year 325 20,425 8,300 16,150 13,680 5,390 4.241 12.125 10,760 9.439 Dividends paid and declared for the period 9,500 The draft statements of financial position as at 31 December 2019 are as follows: Earth Plum Mango $'000 $'000 $'000 Non-current assets Property, Plant and Equipment (NBV) 35,483 24,273 13,063 Investments Shares in Mango Shares in Plum 6,650 3,800 42,133 28,073 13,063 8,883 21.946 Current asset 1,568 43,701 9,025 37.098 Equity $1 ordinary shares Retained earnings 8,000 3,000 2,000 19,898 22,638 24,075 30,638 27,075 21,898 13.063 43,701 10.023 37.098 Current liabilities 48 21.946
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