Reference no: EM132594761

Goldcorp Ltd acquired 80% of the ordinary £1 shares of Silvercorp Ltd on 1 April 2015 for £3 million in cash when Silvercorp's share capital was £1 million and retained profit stood at £1.8 million. The fair value of Silvercorp's intangible non-current assets at the date of acquisition was £0.4 million higher than their book value. Silvercorp Ltd does not account for this amount in its own accounts.

On 1 April 2013 Goldcorp Ltd paid Bronzecorp Ltd £250,000 to acquire 40% of its issued share capital when its share capital and retained profit stood at £100,000 and £120,000 respectively. There is no difference between the book value and the fair value of the net assets at the date of acquisition.

The income statements of Goldcorp Ltd, Silvercorp Ltd and Bronzecorp Ltd for the year ended 31 December 2019 are set out below:

                                       Goldcorp                Silvercorp                   Bronzecorp

                                                    £'000                       £'000                             £'000

Revenue                                   2,560                 970                           200

Cost of sales                              (1,350)               (438)                      (120)

Gross profit                                 1,210                     532                      80

Operating expense                      (580)                       (366)                    (46)

Operating profit                            630                          166                      34

Interest                                       (150)                      (24)                      (10)

Profit before tax                               480                         142                        24

Tax                                                (220)                        (30)                       (8)

Profit after tax                                      260                       112                       16

Question 1: What is the goodwill arising on consolidation?

Option 1: £0.2 million

Option 2: £0.44 million

Option 3: £0.76 million

Option 4: £2.2 million

Question 2: Suppose Goldcorp Ltd had sold goods to Silvercorp Ltd for £200,000 on 1 October 2019. The original cost of these goods was £160,000. Half of these goods were still included in Silvercorp's closing inventory on 31 December 2019. What would be the gross profit included in the consolidated income statement?

Option 1: £1.822m

Option 2: £1.722m

Option 3: £1.542

Option 4: £1.422m

Question 3: What would be the amount relating to the associate undertakings included in the consolidated income statement?

Option 1: £6,400

Option 2: £16,000

Option 3: £88,000

Option 4: £162,000