Question
SOLVE ALL THE QUESTIONS BELOW THAT ARE IN BOLD LETTERS. On 1 January 2017 Picaso Ltd acquired 51% of Sindbad Ltd by $150000 cash and
SOLVE ALL THE QUESTIONS BELOW THAT ARE IN BOLD LETTERS.
On 1 January 2017 Picaso Ltd acquired 51% of Sindbad Ltd by $150000 cash and gained control. On the day of acquisition S had Share capital of $500,000 and Retained earnings of $15000 in as its equity. During the year P sold S Ltd goods for $18000 which includes a mark-up of 50%. Half of these goods were still in stock of S at the end of the year. Also P sold a truck to P Ltd $5000 which had a book value of $4000. The financial statements of the two companies are as follows. Prepare the groups Income Statement and Balance Sheet.
P S
Sales $400,000 $200,000
Less: Cost of Goods Sold 100,000 90,000
Gross profit 300,000 110,000
Operating Expenses:
Selling Expenses 50000 30000
General and Admin Exp 60000 20,000
Net Operating Profit 190,000 60,000
Gain on sale of Truck 1000 ---
Net Profit $189000 $60000
| Balance sheet as on 31 Dec 2017 |
| |
| Asset | P | S |
| Investment in S | $150,000 | - |
| Accounts Receivables | 52,000 | 32000 |
| Inventory | 40,000 | 80000 |
| Land | 800,000 | 680,000 |
| Machine | 450,000 | 165000 |
| Accumulated Depreciation Machine | (20,000) | (12,000) |
| Total Asset | 1,322,000 | 945000 |
| Liability | ||
| Bond | 17,000 | 308000 |
| Accounts Payable | 105,000 | 37000 |
| Equity | ||
| Share Capital | 800,000 | 500000 |
| retained earnings | 400000 | 100000 |
| Liability and equity | 1,322,000 | 945000 |
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