QUESTION 6 ANSWER ALL PARTS OF THIS QUESTION a) Explain the purpose of consolidated financial statements. [2 marks] b) On 1 October 2017, Vlad plc acquired 80% of the ordinary share capital of Don plc. In addition, at 1 October 2017, the retained earnings of Don plc were 54,780. For the year ended 30 September 2020, the Statements of Comprehensive Income of Vlad plc and Don plc were as follows: Vlad plc f Don plc Sales revenue Cost of Goods Sold Gross Profit 1,079,400 307,800 771,600 463,800 166,650 297,150 Expenses Operating Profit 355,440 416,160 57,900 239,250 Dividends received 84,000 Profit before Taxation Taxation 500,160 96,000 239,250 48,000 Profit for the Year 404,160 191,250 For the year ended 30 September 2020, the retained earnings figures for the two companies were shown in their Statements of Changes in Equity as follows: Vlad plc Don plc Balance as at 30 September 2019 198,270 123,330 Profit for the year 404,160 191,250 Dividends paid 270,000 105,000 Balance as at 30 September 2020 332,430 209,580 Other information . . Don plc has no preference shares in issue (and never has). Vlad plc sold goods to Don plc on 25 July 2020 for 30,000. Vlad plc had paid 18,000 to acquire these goods. Of these goods, Don plc had 25% still in inven- tory as at the year-end. REQUIRED: i) ii) Prepare a consolidated Statement of Comprehensive Income for the year ended 30 September 2020. Prepare an extract from the consolidated Statement of Changes in Equity for the year ended 30 September 2020 showing the changes in the group's retained earnings. For the above two requirements, marks will only be awarded if you clearly explain in your workings or on the final statements why you have undertaken each calculation and what the numbers used represent. I.e. simply calculating numbers, even if correctly, will not gain full marks. [20 marks] c) In part b) above, Vlad plc had sold inventory to Don plc. How would your answer have differed if the sale had been by Don plc to Vlad plc? [3 marks] QUESTION 6 ANSWER ALL PARTS OF THIS QUESTION a) Explain the purpose of consolidated financial statements. [2 marks] b) On 1 October 2017, Vlad plc acquired 80% of the ordinary share capital of Don plc. In addition, at 1 October 2017, the retained earnings of Don plc were 54,780. For the year ended 30 September 2020, the Statements of Comprehensive Income of Vlad plc and Don plc were as follows: Vlad plc f Don plc Sales revenue Cost of Goods Sold Gross Profit 1,079,400 307,800 771,600 463,800 166,650 297,150 Expenses Operating Profit 355,440 416,160 57,900 239,250 Dividends received 84,000 Profit before Taxation Taxation 500,160 96,000 239,250 48,000 Profit for the Year 404,160 191,250 For the year ended 30 September 2020, the retained earnings figures for the two companies were shown in their Statements of Changes in Equity as follows: Vlad plc Don plc Balance as at 30 September 2019 198,270 123,330 Profit for the year 404,160 191,250 Dividends paid 270,000 105,000 Balance as at 30 September 2020 332,430 209,580 Other information . . Don plc has no preference shares in issue (and never has). Vlad plc sold goods to Don plc on 25 July 2020 for 30,000. Vlad plc had paid 18,000 to acquire these goods. Of these goods, Don plc had 25% still in inven- tory as at the year-end. REQUIRED: i) ii) Prepare a consolidated Statement of Comprehensive Income for the year ended 30 September 2020. Prepare an extract from the consolidated Statement of Changes in Equity for the year ended 30 September 2020 showing the changes in the group's retained earnings. For the above two requirements, marks will only be awarded if you clearly explain in your workings or on the final statements why you have undertaken each calculation and what the numbers used represent. I.e. simply calculating numbers, even if correctly, will not gain full marks. [20 marks] c) In part b) above, Vlad plc had sold inventory to Don plc. How would your answer have differed if the sale had been by Don plc to Vlad plc? [3 marks]