Reference no: EM133106928
Question - The Managing Director of Arizona plc has asked you to prepare the statement of comprehensive income and statement of financial position for the group. The company has one subsidiary undertaking, Bamela Ltd. The statements of comprehensive income and statements of financial position of the two companies for the year ended 31 December 2016 are set out below.
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Statements of comprehensive income for the year to 31 December 2016
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Arizona plc
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Bamela Ltd
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£000
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£000
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Sales revenue
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76,000
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25,000
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Cost of sales
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(45,200)
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(10,400)
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Gross profit
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30,800
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14,600
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Dividend from Bamela Ltd
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1000
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31,800
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Distribution costs
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(12,800)
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(5,600)
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Administrative expenses
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(7,800)
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(4,800)
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Profit from operations
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11,200
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4,200
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Finance costs
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(1,120)
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(380)
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Profit before taxation
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10,080
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3,820
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Taxation
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(3,000)
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(1,240)
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Profit for the year
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7,080
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2,580
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Statements of Financial Position as at 31 December 2016
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Arizona plc
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Bamela Ltd
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Assets
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(£000)
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(£000)
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Non-current assets
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Property, plant and equipment
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11,800
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5,200
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Investment in Bamela Ltd
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6,200
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18,000
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Current assets
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Inventories
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4,400
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2,100
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Trade receivables
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3,600
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2,880
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Cash at bank
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200
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20
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8,200
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5,000
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Total assets
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26,200
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10,200
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Equity
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Ordinary share capital
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16,000
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7,000
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Retained earnings
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3,800
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1,000
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19,800
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8,000
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Current liabilities
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Trade payables
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4,000
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1,400
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Taxation
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2,400
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800
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6,400
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2,200
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Total equity and liabilities
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26,200
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10,200
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The following information is relevant:
1. Arizona plc acquired 80% of the ordinary share capital of Bamela Ltd on 1 January 2015. On that date, the retained earnings of Bamela Ltd were £400,000
2. During the year, Arizona plc sold goods which had cost £1,000,000 to Bamela Ltd for £1,400,000. Bamela Ltd has sold half of these goods by the end of the year.
3. The fair value of the non-current assets of Bamela Ltd on 1 January 2016 exceeded their carrying amount by £200,000. This valuation has not been reflected in the books of Bamela Ltd.
4. Arizona plc had a trade receivable balance owing from Bamela Ltd of £800,000 as at 31 December 2016, which did not agree with Bamela Ltd's equivalent trade payable due to a payment of £300,000 made by Bamela Ltd that was not received by Arizona Ltd until 4 January 2017.
5. Goodwill arising on consolidation in relation to Bamela Ltd has suffered an impairment loss of 25% since the date of acquisition.
Required -
1. Prepare the consolidated income statement for Arizona plc for the year ended 31 December 2016.
2. Prepare the consolidated statement of financial position for Arizona plc as at 31 December 2016.