Question 2

The Income statement for two entities, Star Company and Blue Stone Company, for the year ended 31st Dec 2019 are presented below:

	Star Company	Blue Stone Company
	OMR 000	OMR 000
Sales Revenue	48000	34800
Cost of sales	(19800)	(16200)
Gross profit	28200	18600
Administrative expenses	(16200)	(15000)
Operating profit	12000	3600
Finance costs	(1800)	(360)
Profit before tax	10200	3240
Taxation	(1200)	(240)
Profit for the year	9000	3000

Intermediate Accounting 2 TAKE-HOME EXAMS Spring 2020 Page 4

The following notes are relevant to the preparation of the consolidated financial statements:

1. (i) Star Company bought 80% of the ordinary shares in Blue Stone Company several years ago.

2. (ii) During the year ended 31st Dec 2019, Blue Stone Company sold goods to Star Company for OMR 300,000 making a cost mark up of 25%. One Quarter of these goods remained in the

   inventory of Star Company at the year end.

3. (iii) At31stDec2019,bothStarCompanyandBlueStoneCompanyrevaluedlandandbuildings,

   and which has not yet been accounted for in the individual financial statements of each entity.

   The surplus arising upon revaluation was OMR 10,000 and OMR 5,000, respectively.

You are required to

A.

B.

Prepare a consolidated statement of profit or loss and other comprehensive income for the year 31st Dec 2018. (Provide Relevant workings where needed).

(15 Marks)

As per IAS 1 requirement for a consolidated statement you are required to: i. Calculate & account Profit after tax attributable to Parent and Non-controlling interest.

(3 Marks)

ii. Calculate & account total comprehensive income for the year attributable to Parent and Non-controlling interest.

(2 Marks)

C. You are a chief accountant of Star Company which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). Your managing director, who is not an accountant, and has a few questions (given below in point i) for you concerning Treatment of unrealized profit:

(i) Is the treatment of unrealized varies depending on the intra sale transaction between parent & subsidiary company &how the unrealized profit amount is identified & recognized .

You are Required to:

Provide answers to the questions raised by the managing director evaluating the key aspects of unrealized profit using relevant examples & journal entries.