Narwee Limited ("Narwee"), a company listed on the Stock Exchange of Hong Kong, is an investment holding company with the following investments: Narwee acquired 70 % of the issued shares of Ryde Limited ("Ryde") on 1 January 2015 When the share capital and retained profits of Ryde were $1,200,000 and $400,000 respectively Narwee acquired 30% of the issued shares of Orange Limited ("Orange") on 1 January 2017 when the retained profits of Orange were $2,400,000. There has been no change in the issued capital of Orange since the acquisition by Narwee. The relevant financial information of the three companies is as follows: Statements of financial position as at 31 December 2017 Orange Ryde Narwee S000 s00 s000 1,400 1,800 2,300 Non-current asset Investment in Ryde 1,800 Investment in Orange Long-term loan to Orange 900 400 Inventories 500 1,000 900 Accounts receivable 300 300 600 Current account with Ryde Cash and cash equivalents 200 500 1,700 900 Total assets 6,400 4,400 4,700 Share capital Retained profits Long term loan from Narwee Accounts payable 2,800 1,200 1,000 2,100 2,400 2,800 400 600 300 200 Current account with Narwee 100 Tax payable Total equity and liabilities 300 400 900 4,700 6,400 4,400 Statements of profit and loss for the year ended 31 December 2017 Narwee Ryde Orange so00 so00 so00 3,200 2,200 Revenue 5,600 Cost of sales (2,600) (1,100) (1,600) Gross profit 3,000 1,600 1,100 Other income 800 100 1,200 1,600 3,800 Selling and distribution expense (200) (100) (900) Administration expenses (400) (200) (400) (400) Other operating expenses (300) (200) 500 Profit before taxation 800 2,200 (200) (100) (400) Taxation 600 400 Profit for the year Retained profits-1 January 2017 Retained profits-31 December 2017 1,800 1,800 2,400 2,800 300 2,100 2,400 The following information is relevant: (1) At the date of acquisition, the carrying amounts of all identifiable net assets of Ryde we the same as their fair values, except for the following items: were Carrying amount Fair value so00 s000 300 550 Land 500 700 Plant and machinery Ryde used the historical cost model for its non-current assets. The plant and machinery had remaining useful life of four years and is depreciated using straight line method. Depreciation on plant and machinery is regarded as part of cost of sales. No depreciation is provided on land. (2) During 2017, Ryde sold goods at selling price $360,000 to Narwee. Ryde invoiced the goods at cost plus 20% mark-up. On 31 December 2017, the value of unsold goods included in the inventory of Narwee was $90,000. (3) On 1 January 2017, a delivery truck owned by Narwee was sold to Ryde at a selling price of $150,000. In the books of Narwee, the cost and accumulated depreciation of the delivery truck were $300,000 and $120,000 respectively. At the date of transaction, Ryde estimated the delivery truck can be used for three years with no residual value. The depreciation expense is part of selling and distribution expenses. (4) The difference in current account between Narwee and Ryde was caused by cash in transit. (5) During the year 2017, there were sales and purchases of goods between Narwee and Orange. Orange sold goods to Narwee The selling price and the cost of sales were $2,000,000 and $1,600,000 respectively. At year end, the percentage of unsold goods in the books of Narwee was 20%. (6) Narwee has a policy of accounting for non-controlling interest using the net assets approach. An assessment of the impairment loss on goodwill indicated that goodwill has not suffered any impairment loss since the acquisition date. Required: Calculate the amount of goodwill arising from the acquisition of Ryde and (a) Orange and explain how they should be presented in the consolidated financial statements. (b) Prepare the consolidated statement of profit or loss for Narwee for the year ended 31 December 2017. Prepare the consolidated statement of financial position for Narwee as at 31 December 2017 (c) Narwee Limited ("Narwee"), a company listed on the Stock Exchange of Hong Kong, is an investment holding company with the following investments: Narwee acquired 70 % of the issued shares of Ryde Limited ("Ryde") on 1 January 2015 When the share capital and retained profits of Ryde were $1,200,000 and $400,000 respectively Narwee acquired 30% of the issued shares of Orange Limited ("Orange") on 1 January 2017 when the retained profits of Orange were $2,400,000. There has been no change in the issued capital of Orange since the acquisition by Narwee. The relevant financial information of the three companies is as follows: Statements of financial position as at 31 December 2017 Orange Ryde Narwee S000 s00 s000 1,400 1,800 2,300 Non-current asset Investment in Ryde 1,800 Investment in Orange Long-term loan to Orange 900 400 Inventories 500 1,000 900 Accounts receivable 300 300 600 Current account with Ryde Cash and cash equivalents 200 500 1,700 900 Total assets 6,400 4,400 4,700 Share capital Retained profits Long term loan from Narwee Accounts payable 2,800 1,200 1,000 2,100 2,400 2,800 400 600 300 200 Current account with Narwee 100 Tax payable Total equity and liabilities 300 400 900 4,700 6,400 4,400 Statements of profit and loss for the year ended 31 December 2017 Narwee Ryde Orange so00 so00 so00 3,200 2,200 Revenue 5,600 Cost of sales (2,600) (1,100) (1,600) Gross profit 3,000 1,600 1,100 Other income 800 100 1,200 1,600 3,800 Selling and distribution expense (200) (100) (900) Administration expenses (400) (200) (400) (400) Other operating expenses (300) (200) 500 Profit before taxation 800 2,200 (200) (100) (400) Taxation 600 400 Profit for the year Retained profits-1 January 2017 Retained profits-31 December 2017 1,800 1,800 2,400 2,800 300 2,100 2,400 The following information is relevant: (1) At the date of acquisition, the carrying amounts of all identifiable net assets of Ryde we the same as their fair values, except for the following items: were Carrying amount Fair value so00 s000 300 550 Land 500 700 Plant and machinery Ryde used the historical cost model for its non-current assets. The plant and machinery had remaining useful life of four years and is depreciated using straight line method. Depreciation on plant and machinery is regarded as part of cost of sales. No depreciation is provided on land. (2) During 2017, Ryde sold goods at selling price $360,000 to Narwee. Ryde invoiced the goods at cost plus 20% mark-up. On 31 December 2017, the value of unsold goods included in the inventory of Narwee was $90,000. (3) On 1 January 2017, a delivery truck owned by Narwee was sold to Ryde at a selling price of $150,000. In the books of Narwee, the cost and accumulated depreciation of the delivery truck were $300,000 and $120,000 respectively. At the date of transaction, Ryde estimated the delivery truck can be used for three years with no residual value. The depreciation expense is part of selling and distribution expenses. (4) The difference in current account between Narwee and Ryde was caused by cash in transit. (5) During the year 2017, there were sales and purchases of goods between Narwee and Orange. Orange sold goods to Narwee The selling price and the cost of sales were $2,000,000 and $1,600,000 respectively. At year end, the percentage of unsold goods in the books of Narwee was 20%. (6) Narwee has a policy of accounting for non-controlling interest using the net assets approach. An assessment of the impairment loss on goodwill indicated that goodwill has not suffered any impairment loss since the acquisition date. Required: Calculate the amount of goodwill arising from the acquisition of Ryde and (a) Orange and explain how they should be presented in the consolidated financial statements. (b) Prepare the consolidated statement of profit or loss for Narwee for the year ended 31 December 2017. Prepare the consolidated statement of financial position for Narwee as at 31 December 2017 (c)