On 1 April 2018, Prosper Ltd acquired 75% of the equity share capital of Sackey Ltd. Sackey Ltd had been experiencing difficult trading conditions and making significant losses. In allowing for Sackey Ltds difficulties, Prosper Ltd made an immediate cash payment of only GHS150 per share. In addition, Prosper Lt will pay a further amount in cash on 30 September 2016 if Sackey Ltd returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimated to be GHS18 million, but at 30 September 2018 in the light of continuing losses, its value was estimated at only GHS15 million. The contingent consideration has not been recorded by Prosper Lt. Overall, the directors of Prosper Ltd expect the acquisition to be a bargain purchase leading to negative goodwill. At the date of acquisition shares in Sackey Ltd had a listed market price of GHS120 each. Below are the summarised draft financial statements of both companies. Statements of profit or loss for the year ended 30 September 2018 Prosper Ltd Sackey Ltd GHS000 GHS000 Revenue 110,000 66,000 Cost of sales (88,000) (67,200) Gross profit (loss) 22,000 (1,200) Distribution costs (3,000) (2,000) Administrative expenses (5,250) (2,400) Finance costs (250) nil Profit (loss) before tax 13,500 (5,600) Income tax (expense)/relief (3,500) 1,000 Profit (loss) for the year 10,000 (4,600) Statements of financial position as at 30 September 2018 Assets Non-current assets Property, plant and equipment 41,000 21,000 Financial asset: equity investments (note (iii)) 16,000 nil 57,000 21,000 Current assets 16,500 4,800 Total assets 73,500 25,800 Equity and liabilities Equity Equity shares of 50 cents each 30,000 6,000 Retained earnings 28,500 12,000 58,500 18,000 Current liabilities 15,000 7,800 Total equity and liabilities 73,500 25,800 The following information is relevant: (i) At the date of acquisition, the fair values of Sackey Ltds assets were equal to their carrying amounts with the exception of a leased property. This had a fair value of GHS2 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales. (ii) Prosper Lt transferred raw materials at their cost of GHS4 million to Sackey Ltd in June 2018. Sackey Ltd processed all of these materials incurring additional direct costs of GHS14 million and sold them back to Prosper Lt in August 2018 for GHS9 million. At 30 September 2015 Prosper Lt had GHS15 million of these goods still in inventory. There were no other intra-group sales. (iii) Prosper Lt has recorded its investment in Sackey Ltd at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2017. The other equity investments have fallen in value by GHS200,000 during the year ended 30 September 2018. (iv) Prosper Lts policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Sackey Ltds share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. (v) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. Required: (a) Prepare the consolidated statement of profit or loss for Prosper Lt for the year ended 30 September 2018. [11 marks] (b) Prepare the consolidated statement of financial position for Prosper Lt as at 30 September 2018. [9 marks] [20 marks]