QUESTION

On 1st January 2020, Jacob acquired 60% of the Equity share capital of Sophy. The summarized financial statements of both companies are as follows:

Income Statement for the year ended 31st December 2020:

	Jacob ($000)	Sophy ($000)
Revenue	80,000	40,000
Cost of Sales	60,000	22,000
Gross Profit	20,000	18,000
Distribution Cost	2,000	2,000
Administrative Cost	6,000	3,000
Finance Cost	1,000	400
Profit before Tax	11,000	12,600
Income Tax Expense	(4,000)	(1,000)
Profit for the year	7,000	11,600

Statement of Financial Position as at 31st December 2020

Assets	$000	$000
Non-Current Asset
Property, Plant and Equipment	40,000	12,000
Investment	10,000
Current Asset	13,000	12,600
Total Assets	63,000	24,600
Equity and Liabilities
Equity Shares of $1 each	13,000	4,000
Retained Earnings	40,000	15,600
	53,000	19,600
Non-Current Liabilities
10% Loan	3,000	2,000
Current Liabilities	7,000	3,000
Total Equity and Liabilities	63,000	24,600

The following information is relevant:

(i) At the date of acquisition, the fair values of Sophy assets were equal to their carrying amounts with the exception of an item of Plant, which had a fair value of $4 million in excess of its carrying amount. It had a remaining life of 5 years at that date.

(ii) Sales from Sophy to Jacob in the post-acquisition period were $6 million. Cost of these goods were $4 million. 80% of these goods were still in inventory.

(iv) Sophy trade receivables at 31st December 2020 included $400,000 due from Jacob.

Required

(a) Prepare the Consolidated statement of Profit or Loss for the year ended 31st December 2020.

(b) Prepare the Consolidated statement of Financial Position for Jacob as at 31st December 2020.