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Consolidation after Acquisition
On 1stJuly 2018, GROWMORE Ltd made a takeover offer for the issued capital of PHOENIX Ltd. The offer closed on the same day at which time GROWMORE Ltd had purchased 90% of the shares in PHOENIX Ltd at a payment of $50 million. The shares were purchased on anex divbasis
At the date of acquisition, the equity section of the financial statements of PHOENIX Ltd shows the following Balances:
Extracts of Accounts GROWMORE PHOENIX 30/06/2020 30/06/2020 PROFIT AND LOSS ACCOUNT Sales $31,579,000 $23,847,000 Inventory, beginning $1,035,000 $1,081,000 Purchases $13,520,000 $14,422,500 Invenotry, ending $1,863,000 $1,910, 152 Cost of Sales $12,692,000 $13,593,348 Gross Profit $18,887,000 $10,253,652 Less: Expenses Operating Expenses $4,951,900 $3, 169,400 General Administration Expenses $1,507,648 $718,748 Depreciation Expense $5, 181,900 $2,590,948 Interest Expense $193,200 $69,000 Total Expenses $11,834,648 $6,548,096 Add: Other Income $0 $0 Dividend and Interest Revenue $4, 076,748 $840,652 $4,076,748 $840,652 Net Profit before Tax $11, 129, 100 $4,546,208 Income Tax Expense $6,648,680 $1,211,624 Net Profit after Tax $4,480,420 $3,334,584 Add Retained Profits o/b $8,717,000 $7,015,000 Total Available $13,197,420 $10,349,584 Less: Appropriations Interim dividends Paid $483,000 $287,500 Transfer to General Reserve $966,000 $0 Dividends Proposed $3,243,000 $1,265,000 Total Appropriations $4,692,000 $1,552,500 Retained Profits c/b $8,505,420 $8,797,084BALANCE SHEET ACCOUNTS Debtors $11,560,372 $8,934,392 Accruals and Receivables $484,724 $10,090,456 Cash $11,298,632 $6,887,904 Inventory $1,863,000 $1,910,148 Investment in Phoenix Ltd $50,000,000 $0 Accumulated Impairment $72,000 Goodwill $2,280,452 $0 Prepaid Expenses $4,234,876 $2,000,000 Land $10,047,500 $9,056,252 Vehicles $4,140,000 $1,196,000 Accumulated Depreciation - Vehicles -$621,000 -$391,000 Marketable Securities $690,000 $833,748 Dividend Receivable $1,782,500 $86,248 Trademarks and Patents $31,766,500 $2,990,000 Debentures in Growmore Ltd $0 $869,400 Deferred Tax Asset $4,707,180 $1,006,252 Property, Plant and Equipment $25,875,000 $11,212,500 Accumulated Depreciation - PPE $8,625,000 $3,536,248 TOTAL $151,412,736 $53,146,052 Deferred Tax Liability $1,929,928 $1,012,000 Tax Payable $6,648,680 $1,211,624 Dividends Payable $3,243,000 $1,265,000 Creditors $16,737,008 $5,265,600 Other Liabilities and Provisions $7,567,600 $4,703,492 Debentures $4,416,000 $0 General Reserve $10,377,600 $5,520,000 Asset Revaluation Reserve $11,587,500 $4,571,252 Share Capital ($1 Ordinary Share) $80,400,000 $20,800,000 Retained Profit $8,505,420 $8,797,084 TOTAL LIABILITIES AND EQUITY $151,412,736 $53,146,052Profit and Loss Appropriation $1,920,000 General Reserve $2,400,000 Share Capital ($1 shares) $20,800,000
