Success Co has identified Respect Co as a possible acquisition within the same industry. Respect Co is currently owned by the German Group and the following are extracts from the financial statements of Respect Co: Extract from the statement of profit or loss for the year ended 31 March 2019 $'000 Revenue 65, 100 Cost of sales (25,800) Gross profit 39,300 Operating expenses (14, 100) Operating profit 25,200 Statement of financial position as at 31 March 2019 $'000 $'000 Assets Non-current assets 29,300 Current assets Inventory Receivables 5,900 6,800 Cash at bank 2,800 15,500 Total assets 44,800 Equity Equity shares Retained earnings 1,200 9,600 10,800 Liabilities Non-current liabilities Loan 20,000 Current liabilities Trade payables Current tax payable 6,500 7,500 14,000 Total equity and liabilities 44,800 Additional information: (0) On 15 June 2018, Respect Co decided to focus on its core business and so disposed of a non-core division. The disposal generated a loss of $1.5m which is included within operating expenses. The following extracts show the results of the non-core division for the period prior to disposal which were included in Respect Co's results for 2019: $'000 Revenue 2,500 Cost of sales (1,400) 1,100 Gross profit Operating expenses Operating profit (840) 260 (ii) At present Respect Co pays a management charge of 1% of revenue to the German Group which is included in operating expenses. Success Co imposes a management charge of 10% of gross profit on all of its subsidiaries. (iii) Respect Co'sadministration offices are currently located within a building owned by the German Group. If Respect Co were acquired, the company would need to seek alternative premises. Respect Co paid rent of $55,000 in 2019. Commercial rents for equivalent office space would cost $144,000. (iv) The following isalist of comparable industry average key performance indicators (KPIs) for 2019: KPI 50% Gross profit margin Operatingprofit margin Receivables collection period 28% 44 days Current ratio 1.6:1 1.2:1 Acid test (quick) ratio Gearing (debt/equity) 270% Required: (a) Redraft Respect Co's statement of profit or loss for 2019 to adjust for the disposal of the non-core division in note (i) and the management and rent charges which wouldbe imposed per notes (ii) and (iii)if Respect Co was acquired by Success Co. (50marks) (b) Calculate the 2019 ratios for Respect Coequivalent to those shown in note (iv) based on the restated financial information calculatedin part (a). (50marks) Note: You should assume that any increase or decrease in profit as a result of your adjustments in part (a) will also increase or decrease cash