5 NBS-5902A Version 1 Question 2. On 1 April 2020 Pin plc acquired 80% of the share capital of Needle plc, when the retained earnings of Needle plc were 180,260. The companies have prepared the following statements of profit or loss for the year ended 31 March 2021: Pin Needle '000 '000 Revenue 1,540 Cost of sales 3,600 (1,020) 2,580 (600) Gross Profit 940 (143) Operating expenses Dividend received from Needle plc (1,185) 28 Profit before tax 1,423 797 Tax (40) (20) Profit for the year 1,383 777 On 4 January 2021, Pin plc sold inventory to Needle plc for 120,000. This inventory had a profit margin of 40% and half of it remained unsold by Needle plc at 31 March 2021. At 31 March 2021, the goodwill on acquisition of Needle plc was considered to have suffered an impairment loss of 220,000. The revenue and expenses in Needle plc have accrued evenly throughout the year. Required: a) Prepare a Consolidated Statement of Profit or Loss for the Pin Group for the year ended 31 March 2021. (12 marks) b) Explain, without using numbers, how your answer would differ had the acquisition of shares in Needle plc taken place on 1 July 2020. (3 marks) c) Pin plc is also considering the purchase of a 25% shareholding in Bodkin plc. Explain why this would be treated differently to the purchase of shares in Needle plc and explain how it would be treated differently in both the consolidated statement of profit or loss and the consolidated statement of financial position. (10 marks) Total 25 marks END OF SECTION A