On 1 January 2018, Ocean Plc established four wholly owned subsidiary companies, all in the same line of business: Shell Ltd was financed entirely by issued share capital of 20 million. Lobster Ltd had issued share capital of 6 million and in addition raised 14 million from the issue of 12% debentures, interest on which was payable annually on 31 December. Crab Ltd and Eel Ltd were both financed by 6 million issued share capital As well as initial working capital of 6 million, all of the companies required the use of a widget machine. The machines cost 14 million each and have 10 year useful life with no residual value. Shell Ltd and Lobster Ltd bought a machine each. Crab Ltd and Eel Ltd each leased a machine for an annual rental payment of 2.278 million over 10 years, payable in arrears on 31 December The cost of capital for each of the four companies is 10% p.a. Each company earns annual gross revenues of 5.6 million and incurs annual operating costs of 3 million over 10 years, payable in arrears on 31 December. Interest and rentals were all paid on the due dates. Required For each subsidiary prepare an income statement for the year ended 31 December 2018 and a statement of financial position as at the 31 December 2018 on the following assumptions: That Shell Ltd and Lobster Ltd each use straight line depreciation over the asset's useful life. That Crab Ltd treats the lease as an operating lease (in spite of IAS 17). That Eel Ltd treats the lease as a finance lease and depreciates the assets on a straight line basis. Show your workings for net current assets. On 1 January 2018, Ocean Plc established four wholly owned subsidiary companies, all in the same line of business: Shell Ltd was financed entirely by issued share capital of 20 million. Lobster Ltd had issued share capital of 6 million and in addition raised 14 million from the issue of 12% debentures, interest on which was payable annually on 31 December. Crab Ltd and Eel Ltd were both financed by 6 million issued share capital As well as initial working capital of 6 million, all of the companies required the use of a widget machine. The machines cost 14 million each and have 10 year useful life with no residual value. Shell Ltd and Lobster Ltd bought a machine each. Crab Ltd and Eel Ltd each leased a machine for an annual rental payment of 2.278 million over 10 years, payable in arrears on 31 December The cost of capital for each of the four companies is 10% p.a. Each company earns annual gross revenues of 5.6 million and incurs annual operating costs of 3 million over 10 years, payable in arrears on 31 December. Interest and rentals were all paid on the due dates. Required For each subsidiary prepare an income statement for the year ended 31 December 2018 and a statement of financial position as at the 31 December 2018 on the following assumptions: That Shell Ltd and Lobster Ltd each use straight line depreciation over the asset's useful life. That Crab Ltd treats the lease as an operating lease (in spite of IAS 17). That Eel Ltd treats the lease as a finance lease and depreciates the assets on a straight line basis. Show your workings for net current assets
