The Earth Group carries on business as a distributor of warehouse equipment and importer of fruits into the country. Earth was incorporated in 2011 to distribute warehouse equipment. It diversified its activities during 2013 to include the import and distribution of fruits and expand its operations by the acquisition of shares in Mango in 2015 and in Plum in 2017. Accounts for all companies are made up to 31 December. The draft income statements for Earth, Mango and Plum for the year ended 31 December 2019 are as follows.

The following information is available relating to Earth, Mango and Plum.

a) On 1 January 2015 Earth acquired 2,700,000 $1 ordinary shares in Mango for $6,650,000 at which date there was a credit balance on the retained earnings of Mango of $1,425,000. No shares have been issued by Mango since Earth acquired its interest.

b) On 1 January 2017 Mango acquired 1,600,000 $1 ordinary shares in Plum for $3,800,000 at which date there was a credit balance on the retained earnings of Plum of $950,000. No shares have been issued by Plum since Mango acquired its interest.

c) During 2019, Plum had made intragroup sales to Mango of $480,000 making a profit of 25% on cost and $75,000 of these goods were in inventory on 31 December 2019.

d) During 2019, Mango had intragroup sales to Earth of $260,000 making a profit of 33-1/3% on cost and $60,000 of these goods were in inventories on 31 December 2019.

e) On 1 November 2019 Earth sold warehouse equipment to Mango for $240,000 from inventories. Mango has included this equipment in its property, plant, and equipment. The equipment had been purchased on credit by Earth for $200,000 in October 2019 and this amount in included in its current liabilities as at 31 December 2019.

f) Mango charges depreciation on its warehouse equipment at 20% on cost. It is company policy to charge a full years depreciation in the year of acquisition to be included in the cost of sales.

g) An impairment test conducted at the year end did not reveal any impairment losses.

h) It is the group policy to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests in Mango on 1 January 2015 was $500.000. The fair value of the 28% non-controlling interest in Plum on 1 January 2017 was $900,000.

Required Prepare for the Earth Group:

a) A consolidated income statement for the year ended 31 December 2019 (15 marks)

Revenue Cost of sales Gross profit Distribution costs Administrative expenses Finance costs Profit before tax Income tax expenses Profit for the year Earth $'000 45,600 18,050 27,550 3,325 3,475 325 20,425 8,300 12.125 Mango $'000 24,700 5,463 19,237 2,137 950 Plum $'000 22,800 5,320 17,480 1,900 1,900 16,150 5,390 10.760 13,680 4,241 9.439 Dividends paid and declared for the period 9,500 The draft statements of financial position as at 31 December 2019 are as follows: Earth $'000 Mango $'000 Plum $'000 35,483 24,273 13,063 Non-current assets Property, Plant and Equipment (NBV) Investments Shares in Mango Shares in Plum 6,650 3.800 28,073 9,025 37,098 42,133 1.568 43.701 Current asset 13,063 8,883 21.946 Equity $1 ordinary shares Retained earnings 8,000 22,638 30,638 3,000 24,075 27,075 2,000 19,898 21,898 Current liabilities 13.063 43,701 10.023 37.098 48 21.946 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Finance costs Profit before tax Income tax expenses Profit for the year Earth $'000 45,600 18,050 27,550 3,325 3,475 325 20,425 8,300 12.125 Mango $'000 24,700 5,463 19,237 2,137 950 Plum $'000 22,800 5,320 17,480 1,900 1,900 16,150 5,390 10.760 13,680 4,241 9.439 Dividends paid and declared for the period 9,500 The draft statements of financial position as at 31 December 2019 are as follows: Earth $'000 Mango $'000 Plum $'000 35,483 24,273 13,063 Non-current assets Property, Plant and Equipment (NBV) Investments Shares in Mango Shares in Plum 6,650 3.800 28,073 9,025 37,098 42,133 1.568 43.701 Current asset 13,063 8,883 21.946 Equity $1 ordinary shares Retained earnings 8,000 22,638 30,638 3,000 24,075 27,075 2,000 19,898 21,898 Current liabilities 13.063 43,701 10.023 37.098 48 21.946