Advanced financial accounting - Lecture 44

Advanced Financial
Accounting
Lec-44
Main Ahmad Farhan


Solution


Income Statement
For the year ended 2000
Rs.

Rs.

Sales

7,500

4,000

Less Cost of goods
sold

4,500

2,900

Gross profit

3,000

1,100

Less Operating
expenses

1,800

600

Operating profit

1,200

500

100

---

1,300

500

Less Income tax

520

200

Net profit after tax

780

300

Less Ordinary
dividend paid

250

125

Net profit after
dividend payment

530

175

1,000

450

Add Dividend income
Net profit before tax

Add Opening retained
profit

Question
The Parent Co. acquired 80% equity of Subsidiary Co. on 1st Jan 2003
for Rs. 1,700 when S paid share capital was Rs. 1,250 and it’s
reserves were worth Rs. 50. During the year S sold to P goods
costing Rs. 1,000 and selling price Rs. 1,250. Total goodwill has
been impaired so-far.
Required: Prepare the consolidated Income Statement for the year
ended for 31-12-2008.


Working
Holding % = 80%
Minority % = 20%


Working
(Goodwill)
Cost of investment
Ordinary share capital of S (1,250+50 x 80%)
Goodwill
Less Impairment of owner’s equity

1,700
1,040
660
660
0

Working
(Opening Balance of Group Retained Profit)
Opening balance of retained profit of
P Co.
Post-acquisition part of opening retained of S Co. to
the extent of holding % (450-50)x80%
Less Goodwill Amortization
Closing balance

1,000
320
1,320
660
660


Working
Minority Interest
Profit after tax of Subsidiary Co. x Minority interest
300 x 20% = 60


Working
Consolidated Sales
Sales of parent Co.
Add Sales of subsidiary Co.
Less Sales made by subsidiary Co.
Consolidated sales

7,500

4,000
1,250
10,250


Working
Cost of Goods Sold
Cost of goods sold of parent Co.
Less Increase in purchase of parent Co.
Add Unrealized profit
Add Cost of goods sold of subsidiary Co.

4,500
1,250
40
2,900
6,190


Solution
Consolidated Income Statement
For the year ended 31st Dec. 2000
Sales
Less Cost of goods sold
Gross profit
Less Operating expenses
Operating profit
Less Income tax
Net profit after tax
Less Minority interest

Less Dividend paid
Opening balance group retained profit
Closing balance group retained profit

10,250
6,150
4,100
2,400
1,700
720
980
52
928
250
670
660
1,330


Question
Income Statement
For the year ended 2008

Rs.

Rs.

Sales

900

600

Less Cost of goods
sold

400

360

Gross profit

500

240

Less Operating
expenses

200

48

Less Selling &
distribution expenses

100

36

Operating profit

200

156

Less Income tax

90

72

110

84

Net profit after tax


Question
The Parent Co. acquired 100% equity of Subsidiary Co. on 30 Sep
2008.
Required: Prepare the consolidated Income Statement for the year
ended for 31-12-2008.


Solution
Consolidated Income Statement
For the year ended 31st Dec. 2000

Sales
Less Cost of goods sold
Gross profit
Less Operating expenses
Less Selling & distribution expenses

Operating profit
Less Income tax
Net profit after tax

Rs.
9M
450
270
180
36
27
117
54
63

Rs.
3M
150
90
60
12
9
39
18

21


Working
Sales
600 x 9/12 = 450
600 x 3/12 = 150
Cost of goods sold
360 x 9/12 = 270
360 x 3/12 = 90
Operating expenses
48 x 9/12 = 36
48 x 3/12 = 12
Selling & distribution expenses
36 x 9/12 = 27
36 x 3/12 = 9
Income tax
72 x 9/12 = 54
72 x 3/12 = 18


Solution
Consolidated Income Statement
For the year ended 31st Dec. 2000
Rs.
Sales (900 + 150)
Less Cost of goods sold (400+90)
Gross profit
Less Operating expenses (200+12)

1,050
490
560
212

Less Selling & distribution expenses (100+9)

109

Operating profit
Less Income tax (90+18)
Net profit after tax

239
108
131