6 The following are the summarised financial statements of Cygnus plc and Messier plc for the financial years ended 31 March 2020: Income Statements for the year ended 31 March 2020 Cygnus plc 000 Messier plc 000 Revenue 19,640 11,220 Cost of sales (11,390) (6,840) Gross profit 8,250 4,380 Operating expenses (1,568) (1,489) Investment income 850 150 Interest receivable 141 75 Finance charges (185) (130) Net profit before taxation 7,488 2,986 Taxation (2,250) (960) Profit for the year 5,238 2,026 as at 31 March 2020 Cygnus plc Messier plc ASSETS 000 000 Non-current assets 3,110 445 Intangible assets Tangible assets Investments, at cost 36,800 24,060 20,500 860 60,410 25,365 Current assets 2,190 1.630 Inventory Trade and other receivables 2,100 1,320 Cash and cash equivalents 1,060 900 5,350 3,850 Total assets 65,760 29,215 EQUITY and LIABILITIES Equity Ordinary shares of 1 40,000 18,000 Retained earnings 21,573 7,195 61,573 25,195 Non-current liabilities Redeemable preference shares 0 1,100 Loans 1,100 1,330 1,100 2,430 Current liabilities Trade and other payables 1,507 1,180 Current taxation 1,580 410 3,087 1,590 Total equity andliabilities 65,760 29,215 The following additional information is available: The ordinary shares in Messier plc each carry one vote and there are no other voting rights in Messier plc other than those attaching to the ordinary shares. Cygnus plc purchased 60% of the ordinary shares in Messier plc on 1 April 2018. The purchase consideration was 20,000,000. Messier plc's balance sheet at 1 April 2018 reported retained earnings of 5,889,000. All the assets recognised in Messier plc's Statement of Financial Position as at 1 April 2018 were agreed to bereported attheir fairvalues. Messier plcalso has internally generated digital rights which have not been recognised in its financial statements. It was agreed that the fair value of these digital rights was 1,000,000 as at 1 April 2018 and 870,000 as at 31 March 2020. The goodwill arising on the acquisition of Messier plc was 2,711,000 and the fair value ofthe non-controlling interestin Messier plcon the acquisition date was agreed to be 7,600,000. On 1 September 2018 Cygnus plcmade a loan of410,000 to Messier plc. The loan is repayable in one lump sum in 2023. The loan bears interest at 10% a year and all interest due on the loan has been paid. The 6% redeemable preference shares in Messier plc are to be treated as debt and the preference dividend treated as loan interest. During the year ended 31 March 2020 Cygnus plc sold inventory costing 810,000 to Messier plc for 1,350,000. On 31 March 2020 Messier's inventory figure included270,000 for these goods. The original costofthese goods to Cygnus plcwas 162,000. On31 March 2020 Messier plchadoutstanding invoices payable to Cygnus plc of 244,000. During the year ended 31 March 2020 the companies made the following dividend payments: Cygnus plc2.5pence per share Messier plc4 pence per share Messier also paid the 6% dividend on its redeemable preference shares. Required a) Prepare the consolidated statement of profit or loss for Cygnus plc for the yearended 31 March 2020. Showall supporting workings clearly. b) Prepare the consolidated statement of financial position for Cygnus plcas at 31 March 2020. Show all supporting workings clearly. c) Show how the goodwill figure of 2,711,000 arising on acquisition was calculated. d) Discuss how Cygnus plc's treatment of the financial statements of Messier plc would have been different if Cygnus plc had purchased only 4,500,000 shares in Messier plc on 1 April 2018. 6 The following are the summarised financial statements of Cygnus plc and Messier plc for the financial years ended 31 March 2020: Income Statements for the year ended 31 March 2020 Cygnus plc 000 Messier plc 000 Revenue 19,640 11,220 Cost of sales (11,390) (6,840) Gross profit 8,250 4,380 Operating expenses (1,568) (1,489) Investment income 850 150 Interest receivable 141 75 Finance charges (185) (130) Net profit before taxation 7,488 2,986 Taxation (2,250) (960) Profit for the year 5,238 2,026 as at 31 March 2020 Cygnus plc Messier plc ASSETS 000 000 Non-current assets 3,110 445 Intangible assets Tangible assets Investments, at cost 36,800 24,060 20,500 860 60,410 25,365 Current assets 2,190 1.630 Inventory Trade and other receivables 2,100 1,320 Cash and cash equivalents 1,060 900 5,350 3,850 Total assets 65,760 29,215 EQUITY and LIABILITIES Equity Ordinary shares of 1 40,000 18,000 Retained earnings 21,573 7,195 61,573 25,195 Non-current liabilities Redeemable preference shares 0 1,100 Loans 1,100 1,330 1,100 2,430 Current liabilities Trade and other payables 1,507 1,180 Current taxation 1,580 410 3,087 1,590 Total equity andliabilities 65,760 29,215 The following additional information is available: The ordinary shares in Messier plc each carry one vote and there are no other voting rights in Messier plc other than those attaching to the ordinary shares. Cygnus plc purchased 60% of the ordinary shares in Messier plc on 1 April 2018. The purchase consideration was 20,000,000. Messier plc's balance sheet at 1 April 2018 reported retained earnings of 5,889,000. All the assets recognised in Messier plc's Statement of Financial Position as at 1 April 2018 were agreed to bereported attheir fairvalues. Messier plcalso has internally generated digital rights which have not been recognised in its financial statements. It was agreed that the fair value of these digital rights was 1,000,000 as at 1 April 2018 and 870,000 as at 31 March 2020. The goodwill arising on the acquisition of Messier plc was 2,711,000 and the fair value ofthe non-controlling interestin Messier plcon the acquisition date was agreed to be 7,600,000. On 1 September 2018 Cygnus plcmade a loan of410,000 to Messier plc. The loan is repayable in one lump sum in 2023. The loan bears interest at 10% a year and all interest due on the loan has been paid. The 6% redeemable preference shares in Messier plc are to be treated as debt and the preference dividend treated as loan interest. During the year ended 31 March 2020 Cygnus plc sold inventory costing 810,000 to Messier plc for 1,350,000. On 31 March 2020 Messier's inventory figure included270,000 for these goods. The original costofthese goods to Cygnus plcwas 162,000. On31 March 2020 Messier plchadoutstanding invoices payable to Cygnus plc of 244,000. During the year ended 31 March 2020 the companies made the following dividend payments: Cygnus plc2.5pence per share Messier plc4 pence per share Messier also paid the 6% dividend on its redeemable preference shares. Required a) Prepare the consolidated statement of profit or loss for Cygnus plc for the yearended 31 March 2020. Showall supporting workings clearly. b) Prepare the consolidated statement of financial position for Cygnus plcas at 31 March 2020. Show all supporting workings clearly. c) Show how the goodwill figure of 2,711,000 arising on acquisition was calculated. d) Discuss how Cygnus plc's treatment of the financial statements of Messier plc would have been different if Cygnus plc had purchased only 4,500,000 shares in Messier plc on 1 April 2018