FACULTY OF COMMERCE, MANAGEMENT AND LAW Page 19 of 22 Question 2 35 Marks The statements of profit and loss and other comprehensive income for Pluto Ltd and Gold Ltd for the year ended 31 December 2020 are shown below: Pluto Gold N$ N$ Revenue 520,000 450,000 Costs of sales (320,000) (300,000) Gross Profit 200,000 150,000 Distribution costs (30,000) (42,000) Administrative expenses (45,000) (45,000) Profit before tax 125,000 63,000 Income tax expense (20,000) (18,000) Profit for the year 105,000 45,000 On 1 January 2020 the companies had the following equity balances: Pluto Gold Share Capital N$5,000,000 N$1,000,000 Retained earnings N$1,200,000 N$800,000 Other reserves N$600,000 N$200,000 Additional information Pluto acquired 70% of the ordinary share capital of Gold Ltd on 1 January 2018 for N$1,500,000. At the date of acquisition Gold had a share capital balance of N$1,000,000 and retained earnings of N$500,000. The group policy is to value non-controlling interest at the proportion of the net assets at the date of acquisition. Required: a) Calculate goodwill to be recognized in the records of the Pluto Group on 1 January 2018 at acquisition of Gold Ltd. (6) b) Prepare the pro-forma consolidation journals for the year ended 31 December 2020. Journal narrations are not required. (15) c) Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2020. (9) d) Calculate the total retained earnings balance to be included in the statement of financial position of the Pluto Group as at 31 December 2020. (5)