Question 2.

On 1 January 2020 Popper plc acquired 80% of the share capital of Tog plc when the retained earnings of Tog plc were 154,000. At acquisition, the fair value of the land held by Tog was 20,000 higher than the book value. The companies have prepared the following financial statements:

Statement of Profit or Loss for the year ended 31 December 2020

Popper

000

Tog

000

Revenue

4,975

1,570

Cost of sales

(1,890)

(610)

Gross Profit

3,085

960

Operating expenses

(1,435)

(466)

Dividend received from Tog plc

160

Profit before tax

1,810

494

Tax

(34)

(32)

Profit for the year

1,776

462

Statement of Financial Position at 31 December 2020

Non- current assets	11,300	4,500
Investment in Tog	4,800
Current Assets: Inventory Receivables Cash	3,350 2,150 600	840 360 75
	22,200	5,775
Equity and liabilities:
1 Ordinary shares	17,000	5,000
Share Premium	2,000
Retained earnings	2,142	406
	21,142	5,406
Current liabilities	1,058	369
	22,200	5,775

On 30 June 2020, Tog sold inventory to Popper for 50,000. Popper immediately sold this on to a customer. The inventory had cost Tog 38,000. On 5 November 2020, Tog plc made a second sale of inventory to Popper plc, this time for 160,000. This inventory had a profit margin of 20% and half of it remained unsold by Popper plc at 31 December 2020. Popper had not paid for the second purchase at the year end.

At 31 December 2020, the goodwill on acquisition of Tog plc was considered to have suffered an impairment loss of 20,000.

Required:

1. Prepare a consolidated statement of financial position for the Popper group as of 31 December 2020, in accordance with international accounting standards.

[16 marks]

2. Prepare a consolidated statement of profit or loss for the Popper Group for the year ended 31 December 2020, in accordance with international accounting standards. [9 marks]

Total 25 marks