Prepare the consolidated statement of profit or loss for Gandolf plc for the year ended 30 June 2021. You should show your workings.

Extracts from the draft individual financial Gandolf plc and its subsidiary for the year ended 30 June 2021 are shown below: Statement of profit or loss for the year ended 30 June 2021 (extract) Gandolf plc Bilbi Ltd Revenue 30,252,500 10,151,000 Cost of sales (17,010,600) (6,903,400) Gross profit 13,241,900 3,247,600 Operating expenses (7,625,300) (1,044,400) Profit from operations 5,616,600 2,203,200 Investment income 400,000 58,000 Profit before tax 6,016,600 2,261,200 Tax expense (1,534,000) (616,000) Profit for the year 4,482,600 1,645,200 The following information is also relevant: (1) On 1 March 2021, Gandolf plc gained control over Bilbi Ltd by acquiring 750,000 ordinary shares with a nominal value of 50p per share. Gandolf plc paid 4 million cash and issued 8 million ordinary 25 pence shares at a market value of 85 pence per share. Bilbi Ltd had the following statement of financial position balances at 1 July 2020: Share capital (50p ordinary shares) Share premium Retained earnings 500,000 1,200,000 6,320,400 At 1 March 2021, the fair values of the net assets of Bilbi Ltd were the same as their carrying amounts with the exception of a building that had a fair value of 90,000 in excess of its carrying amount. At that time the building had a remaining useful life of 30 years. All depreciation charges are presented as operating expenses. Gandolf plc measures the non-controlling interest using the proportionate share of net assets. (2) On 1 April 2021, Gandolf plc sold a machine to Bilbi Ltd for 420,000. The machine was originally bought Gandolf plc three years ago on 1 April 2018 at a cost of 600,000 when it was estimated to have a useful life of six years. At the date of transfer, the machine was deemed to have a further four years useful life. Depreciation on the machine has been recorded within cost of sales. Profit on sale of the machine has been recorded within operating expenses. (3) Many years ago, Gandolf plc acquired 40% of the 200,000 1 ordinary shares of Aragon Ltd, an investment which provides Gandolf plc with significant influence. Aragon Ltd made a profit for the year ended 30 June 2021 of 442,000. As a result of economic changes during the year, Gandolf plc's investment in Aragon Ltd has become impaired by 50,000. This impairment has been recorded within cost of sales. (4) The following dividends were paid in June 2021: Gandolf plc 16 pence per share Bilbi Ltd 48 pence per share Aragon Ltd 50 pence per share Gandolf plc has recorded dividends received from investments in Bilbi Ltd and Aragon Ltd in its single entity financial statements by posting a debit to bank in the statement of financial position and a credit to investment income in the statement of profit or loss. (5) The following intra-group sales have occurred during the year ended 30 June 2021: Date Seller Buyer Selling Proportion in price inventories at the year end March 2021 Aragon Ltd Gandolf plc 200,000 30% June 2021 Gandolf plc Bilbi Ltd 380,000 80% Gandolf plc sells goods at a margin of 25%. Aragon Ltd sells goods at a mark-up of 25%. (6) Gandolf plc had the following equity balances on 1 July 2020: Share capital (1 ordinary shares) 4,000,000 Share premium 8,000,000 Retained earnings 12,777,100 (7) Gandolf plc has no investments other than those in Bilbi Ltd and Aragon Ltd. (8) Profits, revenues and costs in all companies accrue evenly throughout the year