Question two

Peter Ltd acquired 80% of preference shares of Sue Ltd when retained projects for Sue Ltd were Kshs. 10,000. In addition, Peter Ltd owns 30% of the loan stock of sue ltd. The following are the draft income statement of the year to 31^st December 2012.

	P	S
	Kshs.	Kshs.
Turnover	962,212	227,383
Cost of sales	621,679	169,463
Gross profit	340,533	57,920
Distribution costs	21,460	2,460
Administrative costs	46,293	13,940
	272,780	41,520
	16,900	2,400
Investment income	0	4,000
Interest on loan stock	289,680	39,920
Earnings before tax	289,680	39,920
Taxation	121,340	13,920
Earnings after tax	189,840	16,000
Extra ordinary income	21,500	6,000
	189,840	32,000
Dividend	40,00	10,000
	149,840	22,000
Returned earnings	30,000	12,000
	179,840	34,000

Additional information:

1. Turnover of Peter included Kshs. 100,129 of goods sold to Sue.
2. The stock of Sue includes an unrealized profit of Kshs. 3,,400
3. The dividends of Sue are Kshs. 6,000 ordinary and 4,000 preference
4. The investment income of Peter includes Kshs. 4,800 of Sue ordinary dividend, Kshs. 1,000 of Sue preference dividend and Kshs. 1,200 of Sue loan stock interest.

Required

Provide consolidated income statement