Reference no: EM132591626

Question a) Identify, giving name and number, the IASB standard studied on the course that deals with accounting for groups of companies.

Question b) On 1 April 2019 Donald Ltd. acquired 75% of the ordinary share capital of Boris Ltd. Boris' share capital consisted of only ordinary shares. Each year both companies prepare their accounts to 30 September. The statements of comprehensive income for the year to 30 September 2019 were as follows:

                                        Donald Ltd.                     Boris Ltd.

                                          £                               £

Sales revenue                635,000                  192,000

Cost of sales                    (299,000)               (62,400)

Gross profit                      336,000                129,600

Distribution costs               (72,600)                (9,600)

Administrative expenses     (118,800)                (40,800)

Profit before taxes              144,600                79,200

Taxation                         (28,000)            (15,000)

Profit for the year           116,600             64,200

Further relevant information is as follows:

• Two-thirds of the sales, cost of sales and distribution costs of Boris Ltd. occur in the second half of the accounting year. Administrative expenses are spread evenly throughout the year. £11,200 of Boris Ltd.'s tax liability relates to the second half of the accounting year.
• Goodwill arising on consolidation has not suffered an impairment loss.
• Movements in the retained earnings of Donald Ltd. and Boris Ltd. for the year to 30 September 2019 were as follows:

                                                           Donald Ltd.                      Boris Ltd.

                                                       £                                 £

Balance at 30 September 2018           225,200                  155,400

Profit for the year                            116,600                  64,200

Balance at 30 September 2019           341,800                 219,600

Required:

Prepare one consolidated statement of comprehensive income for the year to 30 September 2019 and calculate the group's retained earnings at that date. Show all numerical workings and explain why each calculation (or set of calculations) that you undertake is done.

Question c) Further to the information given in part b), if, during the accounting year ended 30 September 2019, Boris Ltd. had sold goods that had cost £50,000 to Donald Ltd. for £75,000, how would this have affected your answer? You may assume that all of these goods had been sold by the year end and have been included in the figures for Boris Ltd. given in part b). You do not need to recalculate the full consolidation; merely explain how this information would have affected the outcome.