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Boo acquired 80% of Goose's equity shares for $300,000 on 1 January 20X8. At the date of acquisition Goose had retained earnings of $190,000. On 31 December 20X8 Boo dispatched goods which cost $80,000 to Goose, at an invoiced cost of $100,000. Goose received the goods on 2 January 20X9 and recorded the transaction then. The two companies' draft financial statements as at 31 December 20X8 are shown below.
|
STATEMENTS OF PROFIT OR LOSS AND |
||
| Boo | Goose | |
| $'000 | $'000 | |
| Revenue | 5,000 | 1,000 |
| Cost of sales | 2,900 | 600 |
| Gross profit | 2,100 | 400 |
| Other expenses | 1,700 | 320 |
| Profit before tax | 400 | 80 |
| Income tax expense | 130 | 30 |
| Profit for the year | 270 | 50 |
| Other comprehensive income: | ||
| Gain on revaluation of property | 20 | – |
| Total comprehensive income for the year | 290 | 50 |
| STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 20X8 |
||
| $'000 | $'000 | |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 1,940 | 200 |
| Investment in Goose | 300 | – |
| 2,240 | 200 | |
| Current assets | ||
| Inventories | 500 | 120 |
| Trade receivables | 650 | 40 |
| Bank and cash | 170 | 35 |
| 1,320 | 195 | |
| Total assets | 3,560 | 395 |
| Equity and liabilities | ||
| Equity | ||
| Share capital | 2,000 | 100 |
| Retained earnings | 500 | 240 |
| Revaluation surplus | 20 | – |
| 2,520 | 340 | |
| Current liabilities | ||
| Trade payables | 910 | 30 |
| Tax | 130 | 25 |
| Total equity and liabilities | 3,560 | 395 |