Question 1 Wind ple prepares its financial statements to 31 December each year. They purchased 80% of the 1 ordinary shares in Rain Ltd on 1 January 2018 for 2,250,000. The fair value of Rain Ltd's net assets was the same as their book value except for plant and equipment that was understated by 400,000. Rain Ltd has not reflected this in its financial statements at 31 December 2018. On 1 July 2018 Wind ple purchased 30% of the el ordinary shares in Ice Ltd for 750,000. On this date the fair value of Ice Ltd's net assets was the same as their book value. Statement of Profit or Loss for the Year Ended 31 December 2018 Wind ple '000 15,000 9,000 6,000 2,200 3,800 160 Revenue Cost of sales Gross profit Operating expenses Operating profit Investment income Profit/Loss before taxation Income tax expenses Profit/Loss after taxation 3,960 1,200 2,760 Wind ple Rain Ltd Rain Ltd '000 5,200 1,460 980 '000 2,500 1,250 1,250 250 1,000 1,000 300 700 Ice Ltd '000 1000 350 650 expenses. 3. Revenue reserves of the three companies at 31 December 2018 is as follows: Additional information: 1. In October 2018, Rain Ltd sold goods to Wind ple with an invoice value of 400,000 on which Rain Ltd made a mark-up of 25%. One half of these goods remained in Wind ple's inventory at 31 December 2018. There was no other trading between Wind plc, Rain Ltd and Ice Ltd during 2018. 2. None of these three companies has issued or cancelled shares since incorporation. Each of the companies depreciates plant and equipment on a straight-line basis at 25% per annum, with depreciation being reflected in operating 150 500 0 500 120 380 a. b. c. Ice Ltd 4. With respect to the measurement of non-controlling interests at the date of acquisition of Rain Ltd, the proportionate share method is used. The directors of Wind ple are confident that any goodwill arising on acquisition of Rain Ltd and the carrying value of the investment in Ice Ltd have not been impaired at 31 December 2018. 5. The shareholders of Wind plc and Rain Ltd approved the proposed dividends in December 2018. These were paid in 2019. 6. The activities and profits of the three companies accrue evenly throughout the year. Requirement Prepare a consolidated Statement of Profit and Loss of Wind Group for the year ended 31 December 2018. - 40 marks