Alpha paid £4,800 to acquire 3,000 ordinary shares of £1 each in Beta on 1 January 2010 when:

(i) Beta’s share capital consisted of 4,000 ordinary shares of £1 each;

(ii) Beta’s reserves stood at £720; and

(iii) the fair value of Beta’s identifiable non-monetary assets exceeded the book value by £780.

The Statements of income prepared by both companies are as shown.

You are further informed as follows:

(a) During the year Alpha sold goods to Beta, invoicing them at £320. As at the year-end 25% of these goods remain with Beta. Alpha invoices Beta at cost plus a third.

(b) Based on fair value Beta should have written off £20 more per year as depreciation.

(c) Two-thirds of Beta’s interest payments were to Alpha.

(d) The goodwill in Beta was valued at £1,000 on 31 December 2011 and at £840 as at 31 December 2012.

Required: Prepare the Consolidated Statement of income and the Statement of changes in equity 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 Beta Administrative expenses Operating profit Dividend received Interest income Interest expense Profit before taxation Taxation Profit after taxation Alpha £ 8,200 (5,450) 2,750 (694) (826) 1,230 60 20 1,310 (240) 1,070 Beta £ 1,280 (920) 360 (58) (122) 180 (30) 150 (30) 120