Notes Ocean K 000 Lake K 000 Lagoon K 000 60 000 16 500 30 000 30 000 (1)(iv) Non-current assets: Property, plant and equipment Investment (partially calculated) Current assets: Inventory Current account with Lake Trade receivables Cash and cash equivalents 10 500 20 000 17 500 (v) 3 500 18 500 9 000 13 000 44 000 2 000 5 000 73 000 34 500 35 500 Total assets 133 000 94 500 52 000 12 000 6 000 Equity: Share capital of K 1.00 shares Share premium Retained earnings 15 000 10 000 2 000 2 000 8 500 40 300 65 300 15 000 29 000 16 500 30 000 28 000 13 000 Non current liabilities Loan notes Current liabilities: Current account with Ocean Trade payables Current tax 3 500 10 000 30 000 17 500 7 000 5 000 9 000 22 500 133 000 34 000 93 000 20 000 49 500 Total equity and liabilities Additional information: (i) Ocean acquired 60% of Lake's equity shares on 1 April 2018 via a share exchange when Lake's retained earnings were K 6 000 000. The details of the share for share exchange were as follows: Ocean exchanged 5 of its shares for every 10 shares in Lake. Ocean also paid cash of K 4 800 000. The market value of Ocean's shares was K 6.00 at 1 April 2018 and K 8.00 at 31 March 2020. Ocean accounted for the acquisition of Lake but credited the total amount of investment to a loan account. (i) The fair value of Lake's property, plant and equipment on 1 April 2018 exceeded its carrying amount by K 8 500 000. K 5 500 000 of the excess of fair value over carrying value was attributed to land owned by Lake. The difference between the two amounts is attributed to plant. At the date of acquisition, the plant had a remaining useful life of 15 years. Depreciation of plant is charged to cost of sales. (iii) Ocean carried out an impairment review of the goodwill arising on the acquisition of Lake and found out that as at 30 March 2020 the goodwill had been impaired by K 15 000. (iv) Ocean purchased 1 500 000 of Lagoon's equity shares on 1 April 2018 for K 8 500 000 The retained earnings of Lagoon on 1 April 2018 were K 6 500 000 and the fair value of Lagoon's net assets was the same as its carrying value at that date. Ocean has not yet accounted for the acquisition of shares in Lagoon and exercises significant influence over all aspects of Lagoon's financial and operating policies. (v) During the year Lake sold goods to Ocean for K 10 000 000 based on a mark-up of 20%. On 31 March 2018 30% of the goods were included in Ocean's closing inventory. (vi) During the year the investment in Lagoon had suffered an impairment loss of K 45 000. (vii) The fair value of non controlling interest shares on 1 April 2018 in Lake was K 7.20 per share. 3 Required: a) Prepare the following workings: A calculation of investment in Lake A calculation of investment in Lagoon A calculation of Unrealised Profit (9 marks) (7 marks) (7 marks) b) Prepare the Group retained earnings for the Ocean Group of companies. (10 marks) c) Prepare the Ocean Group Consolidated Statement of Financial Position as at 31 March 2020 (17 marks) Notes Ocean K 000 Lake K 000 Lagoon K 000 60 000 16 500 30 000 30 000 (1)(iv) Non-current assets: Property, plant and equipment Investment (partially calculated) Current assets: Inventory Current account with Lake Trade receivables Cash and cash equivalents 10 500 20 000 17 500 (v) 3 500 18 500 9 000 13 000 44 000 2 000 5 000 73 000 34 500 35 500 Total assets 133 000 94 500 52 000 12 000 6 000 Equity: Share capital of K 1.00 shares Share premium Retained earnings 15 000 10 000 2 000 2 000 8 500 40 300 65 300 15 000 29 000 16 500 30 000 28 000 13 000 Non current liabilities Loan notes Current liabilities: Current account with Ocean Trade payables Current tax 3 500 10 000 30 000 17 500 7 000 5 000 9 000 22 500 133 000 34 000 93 000 20 000 49 500 Total equity and liabilities Additional information: (i) Ocean acquired 60% of Lake's equity shares on 1 April 2018 via a share exchange when Lake's retained earnings were K 6 000 000. The details of the share for share exchange were as follows: Ocean exchanged 5 of its shares for every 10 shares in Lake. Ocean also paid cash of K 4 800 000. The market value of Ocean's shares was K 6.00 at 1 April 2018 and K 8.00 at 31 March 2020. Ocean accounted for the acquisition of Lake but credited the total amount of investment to a loan account. (i) The fair value of Lake's property, plant and equipment on 1 April 2018 exceeded its carrying amount by K 8 500 000. K 5 500 000 of the excess of fair value over carrying value was attributed to land owned by Lake. The difference between the two amounts is attributed to plant. At the date of acquisition, the plant had a remaining useful life of 15 years. Depreciation of plant is charged to cost of sales. (iii) Ocean carried out an impairment review of the goodwill arising on the acquisition of Lake and found out that as at 30 March 2020 the goodwill had been impaired by K 15 000. (iv) Ocean purchased 1 500 000 of Lagoon's equity shares on 1 April 2018 for K 8 500 000 The retained earnings of Lagoon on 1 April 2018 were K 6 500 000 and the fair value of Lagoon's net assets was the same as its carrying value at that date. Ocean has not yet accounted for the acquisition of shares in Lagoon and exercises significant influence over all aspects of Lagoon's financial and operating policies. (v) During the year Lake sold goods to Ocean for K 10 000 000 based on a mark-up of 20%. On 31 March 2018 30% of the goods were included in Ocean's closing inventory. (vi) During the year the investment in Lagoon had suffered an impairment loss of K 45 000. (vii) The fair value of non controlling interest shares on 1 April 2018 in Lake was K 7.20 per share. 3 Required: a) Prepare the following workings: A calculation of investment in Lake A calculation of investment in Lagoon A calculation of Unrealised Profit (9 marks) (7 marks) (7 marks) b) Prepare the Group retained earnings for the Ocean Group of companies. (10 marks) c) Prepare the Ocean Group Consolidated Statement of Financial Position as at 31 March 2020 (17 marks)