Back plc (“Back”) prepares its financial statements to 31 December each year. On | January 2017, Back acquired 90% of the ordinary share capital of Front Limited (“Front”) at a cost of €3,808,000. The draft statements of profit or loss and other comprehensive income of Back and Front for the year ended 31 December 2017 are as follows:

Additional Information:
2 1. The net assets of Front on 1 January 2017 were as follows:

The difference between the carrying value and the fair value of property, plant and equipment is due to a revaluation of property, while the reduction in inventory relates to a fair value adjustment in order to bring Front’s inventory into line with those of Back.
Otherwise the accounting policies adopted by Front are similar to those of Back.. The required change in the closing inventory value of Front to ensure uniform accounting policies is a decrease of €120,000. The fair values shown above have not yet been incorporated into Front’s financial statements.
2. Following the acquisition of shares in Front, the directors of Back decided to run down certain parts of Back’s business activities. These were finally discontinued in December 2017. The combined contribution to the business of these activities in 2017 was:

3. The directors of Back estimate that the goodwill arising on the acquisition of Front was impaired by €28,000 at 31 December 2017.
4. Back and Front follow a policy of depreciating all fixed assets at 10% per annum on their carrying value. Depreciation is charged to cost of sales in the statement of profit or loss and other comprehensive income.
5. Front purchases raw materials from Back. During the year ended 31 December 2017, purchases of these raw materials by Front from Back amounted to €10,000,000. At 31 December 2017, the inventory of Front included raw materials purchased from Back at a cost of €3,000,000. Back supplies raw materials at cost plus 25%.
Requirement Prepare the consolidated statement of profit or loss and other comprehensive income of Back Group plc for the year ended 31 December 2017 in a form suitable for publication.

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Back Front 000 000 Revenue 90,000 7,800 Cost of sales (60,000) (4,900) Gross profit 30,000 -2,900 Operating expenses (9,900) (760) Operating profit 20,100 2,140 Finance costs (160) (40) Interest receivable Profit before tax 80 20,020 20 2,120 Income tax expense (6,420) (400) Profit after tax 13,600 1,720