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QUESTION 5 (25 MARKS) Purple Ltd acquired 360,000 of the 400,000 ordinary shares ($1 each) for $ 900,000 on 01 October 2018. At the acquisition date, retained earnings of Shuttle Ltd was $ 300,000. The income statement of the two companies for the year ended 31 December 2018 were as per below: Purple Shuttle $ $ Revenue 1,350,000 1,080,000 Cost of sales (570,000) (592,500) Gross profit 780,000 487,500 Investment income 7,800 1,500 787,800 489,000 Distriution costs (132,000) (70,500) Administrative expenses (325,500) (126,000) Profit before tax 330,300 292,500 Taxation (105,000) (90,000) Profit after tax 225,300 202,500 NOTES 1. The investment income of Purple Ltd comprises the company's share of the dividend paid by Shuttle Ltd. 2. On 30 October 2018, Purple Ltd sold goods to Shuttle Ltd for $ 200,000 at a gross profit margin of 25%. Half of these goods remain unsold at the year end. 3. Goodwill has been impaired by $ 45,000 for the year ended 31 December 2018. The Purple Group measures goodwill using the proportion of net assets method. REQUIRED Prepare a consolidated income statement of profit or loss for the Purple Group for the year ended 31 December 2018