QUESTION Nassau is a 90% subsidiary of Bahamas that was acquired one year ago for GH4,000m when the accumulated profit was GH800m. Income statements Bahamas Nassau GH GH Revenue 20,000 4,000 Cost of sales (12,000) (2,000) Gross profit 8,000 2000 Distribution costs (2100) (300) Administration expenses (1,400) (500) Operating profit 4,500 1,200 Exceptional gain nil 580 Investment income 90 nil Finance cost (600) (150) Profit before tax 3990 1630 Tax (700) (130) Profit for the year 3,290 1,500

Statement of financial position Bahamas Nassau GH GH Investment in Nassau 4,000 Assets 20,000 5,000 24,000 5,000

Share capital (GH1) 5,000 1,000 Accumulated profits 15,690 2,200 Equity 20,690 3,200 Liabilities 3,310 1,800 24,000 5,000 Bahamas statement of changes in equity Share accumulated total Capital profits equity GH GH GH Opening balance 5,000 12,600 17,600 Profits for the year 3,290 3,290 Less dividends (200) (200) Closing balance 5,000 15,690 20,690

Additional information 1 During the year Bahamas sold goods to Nassau for GH100m. these goods were sold at a margin of 20% and one quarter remain in inventory at the year-end. (inter-company sales must be eliminated and unrealized made. The sales are made by the parent so the NCI will not be charged with the unrealized profit) 2 During the year Nassau has sold goods to Bahamas for GH180m. these goods were sold at a mark-up of 50% and one half remain in inventory at the year end. (these sales are made by the subsidiary so the NCI will be charged with the unrealized profit) 3 At the year-end there were no outstanding inter-company current account balances. 4 At the date of acquisition the fair values of Nassaus net assets were equal to their book value with the exception of an item of plant that had a fair value of GH200m in excess of its carrying value and a remaining useful life of four years 5 Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose. (so no gross goodwill or fair value of the NCI). Both companies have paid a dividend during the year. The dividend distributed by Bahamas was GH200m and that of Nassau GH100m. the investment income that Bahamas has recognized is the dividend received from Nassau shortly before the year-end. (the dividend received by the parent from the subsidiary is not external group income and so must be eliminated). Required: Prepare the consolidated statement of financial position and consolidated income for the Bahamas group.