Question 1

You are presented with the following summarized financial information for Nest Limited and its subsidiary Bank Limited:

Income Statement for the Year ending 31 December 2018

	Nest Limited	Bank Limited
	$000	$000
Revenue	5,700	3,000
Cost of Sales	1,200	950
Gross Profit	4,500	2,050
Administration Expenses	(300)	(150)
Selling and Distribution Expenses	(400)	(200)
Dividend from Bank Ltd	300
Profit Before Taxation	4,100	1,700
Taxation	(300)	(150)
Profit for the year	3,800	1,550

Additional Information:

1. Nest Limited acquired 1,200,000 of the equity shares in Bank Limited on January 1, 2017. The total ordinary shares of Bank Limited on January 1, 2017 was $1,500,000 and its retained profits balance was $350,000 at that date.

2. During the year Nest paid dividends of $360,000 and Bank paid dividends of $150,000. Also, Nest Limited sold goods to Bank Limited costing $70,000 at a margin of 20%. At the end of the period, half of these goods were in Bank Limited inventory.

Required:

i. Prepare Nest Limited Group Consolidated Income Statement for the year ending 31

December 2018. (15 marks).

ii. Explain the following terms used in group accounting:

A. Non-Controlling Interest		(2.5 marks)
B. Subsidiary		(2.5 marks)