Alpha paid £3,600 to acquire 2,400 ordinary shares in Beta on 1 January 2010 when:

(i) Beta’s Share capital consisted of 3,000 ordinary shares of £1 each, quoted at 160p each;

(ii) Beta’s reserves stood at £840; and

(iii) the fair value of Beta’s identifiable non-monetary assets exceeded the book value by £560.

The Statements of income prepared by both companies are shown. You are informed as follows:

(a) During the year Beta sold goods to Alpha for £480, invoicing them at cost plus 20%. Goods invoiced at £96 remain with Alpha at the year-end, while those invoiced at £24 remain in transit.

(b) 75% of interest expense incurred by Beta was paid to Alpha.

(c) Depreciation, if calculated on the basis of fair values, should have been £20 more per year.

(d) As at 31 December 2012 goodwill in Beta was valued at £100.

Required: Prepare the Consolidated Statement of income for the year ended 31 December 2012.

Transcribed Image Text:

Statements of income year ended 31 December 2012 Sales revenue Cost of sales Gross profit Distribution cost Administrative expenses Operating profit Dividend from Beta Interest income Interest expense Profit before taxation Taxation Profit after taxation Alpha £ 8,200 (5,450) 2,750 (694) (826) 1,230 40 30 - 1,300 (240) 1,060 Beta £ 1,280 (920) 360 (58) (122) 180 (40) 140 (30) 110