Question 2

The Statement of Financial Position for Octagon Limited and Superior Sales Limited as at 31 December 2019 are shown below:

	Octagon Limited	Superior Sales Limited
Non-Current Assets:	$	$
Property, Plant & Equipment	3,000	1,500
Investments: in Superior Sales Ltd	1,500	-
	4,500	1,500
Current Assets:
Inventory	650	200
Accounts Receivables	750	420
Cash and Bank	350	100
	1,750	720
Total Assets	6,250	2,220
Current Liabilities:
Accounts Payables	250	175
Accruals	150	40
	400	215
Non- Current Liabilities:
Debentures	1,200	800
Deferred Taxation	300	130
	1,500	930
Share Capital and Reserves:
Ordinary Share Capital @ $1 each	3,150	975
Retained Profit	1,200	100
	4,350	1,075
	6,250	2,220

Additional Information:

1. Octagon Limited acquired 2,000,000 of the equity shares in Superior Sales Limited on January 1, 2018. The total equity shared of Superior Sales Limited was 2,500,000 and Superior Sales Limited's retained profits balance was $450,000 at that date.

2. Property, Plant and Equipment (PPE) for Octagon Limited increased by $2.5m due to a revaluation carried out by the company and this was not accounted for at the end of the year. There was no impairment of assets during the year.

Required:

1. Prepare Octagon Limited group consolidated Statement of Financial Position as of 31 December 2019? (16 marks)
2. Explain the terms Pre-acquisition and Post Acquisition profits? (4 marks)