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RedBerry Co Zen Co Assets $ $ Non current assets Tangible assets 471,000 110,000 Investments: Zen PLC 250,000 Current assets Inventories 220,600 75,600 Trade receivables

RedBerry Co

Zen Co

Assets

$

$

Non current assets

Tangible assets

471,000

110,000

Investments: Zen PLC

250,000

Current assets

Inventories

220,600

75,600

Trade receivables

290,400

140,700

Cash and cash equivalents

60,000

75,450

Total Assets

1,292,000

401,750

Equity and liabilities

Share capital :Ordinary $1 shares

750,000

150,000

Share premium

-

18,750

Retained earnings

112,000

80,000

Non- current liabilities:

6% Loan

85,000

60,000

Current liabilities

Trade and other payables

345,000

93,000

Total Equity & Liabilities

1,292,000

401,750

Assignment Scenario 01

RedBerry Co and Zen Co

The following are the draft statement of Financial Position of RedBerry Co and its subsidiary Zen Co as at 31st December 2019 are given below:

Additional information:

  1. RedBerry Co acquired 120,000 shares in Zen Co on 1st Jan 2019 for a cost of $ 250,000when the retained earnings of Zen Co were $ 40,000. The fair value of the non-controlling interest in Zen Co at the date of acquisition was $44,000.
  2. At the date of acquisition, the fair value of the net assets of Zen Co approximated their carrying amounts, except for a plot of land owned by Zen Co. This land was held in the financial statements of Zen Co at its cost of $40,000 but was estimated to have a fair value of $95,000. This land is still owned by Zen Co at 31st December 2019.
  3. At 31st December 2019 RedBerry Co s inventory included $ 12,000 of goods purchased from Zen PLC. Zen Co earns a mark- up of 25% on sales.

Zen PLC. Zen Co earns a mark- up of 25% on sales.

  1. At 31st December 2019 Zen Co s trade receivables include $ 75,000 due from RedBerry Co and RedBerry Co s trade payable include $ 75,000 due to Zen PLC.

Question 1

You are required to:

  1. Prepare consolidate statement of financial position as at 31st December 2019 of RedBerry Co . (Provide Reference to IFRS wherever applicable and relevant workings)

(Relevant workings 3 marks + consolidated statement of financial position 3marks)

(Q.1 -A- 6 Marks)

  1. Briefly explain the concept of unrealised profit & Evaluate the adjustment of provision for unrealized profit if:

At 31st December 2019, RedBerry Co sold goods to Zen Co for $ 30,000 at a Margin of 25%. 1/4th of these goods were still unsold by Zen Co at the end of the year.

(Q.1 -B: Total 4 Marks) (Total Marks Q.1= 10 Marks)

Note: For solving question no. 1, you should use information given in Assignment Scenario 01.

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