QUESTION $1(15$ marks$)$

The statement of profit or loss for Victory Ltd and Gina Itd are given for the year ended $30\mathrm{.}9\mathrm{.}20.$

Statement of profit or loss for the vear ended $30\mathrm{.}09\mathrm{.}2020$

Additional information

On $1\mathrm{.}1\mathrm{.}2020$ Victory Ltd acquired $80\%$ of the share capital of Gina Ltd$.$ Victory Ltd issued $1$

new share for every $2$ shares of Gina Ltd acquired, when the market value of the share of Victory

Ltd was $$7$ and the market value of the share of Gina Ltd was $$4.$ On $31\mathrm{.}12\mathrm{.}2020,$ Victory Ltd will

pay $$1\mathrm{.}80$ per share acquired to shareholders of Gina Ltd$.$ Cost of capital is $9\%$ per annum.

At the date of acquisition, the fair value of Gina Ltd assets was equal to their carrying amounts

with two exemptions $($the fair value changes of which has not been incorporated into the financial

statements of Gina Ltd$).$ An item of plant had a fair value of $1$ million above its carrying amount,

its remaining life was $5$ years and depreciation is charged to cost of sales and Gina Ltd had a

contingent liability which Victory Ltd estimated to have a fair value of $$600000$ which did not

change as at $30\mathrm{.}09.2020.$

Victory Ltd values $NCl$ at fair value at acquisition date by using the market value of Gina Ltd

shares at that date which is representative of the fair value of the shares held by $NCl$

Sales from Victory Ltd to Gina Ltd during the year ended $30\mathrm{.}09\mathrm{.}2020$ were $700000$ per month

at a mark$-$up of $25\%$ on cost$.$ Gina Ltd had $$1$ million of these goods in stock at $30\mathrm{.}09.2020.$

Victory Ltd investment income is a dividend received from investment in a $35\%$ owned

associate, held for few years, the profit of which was $$1$ million for the year ended $30\mathrm{.}09\mathrm{.}2020.$

Although Gina Ltd was profitable since the acquisition by Victory Ltd$,$ the market for Gina Ltd

products was hit in recent months and Victory Ltd calculated that goodwill was impaired by $$1$

a$.$ Prepare consolidated statement of profit or loss for Victory Ltd for the year ended $30\mathrm{.}09\mathrm{.}20.$