You are provided with the draft accounts of M Ltd and S Ltd at $31$ December $2018$

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED $31$ DECEMBER $2018$

M Ltd S Ltd

K$000$ K$000$

Revenue $5,0001,000$

Cost of sales $2,900600$

Gross profit $2,100400$

Other Expenses $1,700320$

Net profit $40080$

Tax $13025$

Profit $27055$

STATEMENT OF FINANCIAL POSITION AS $31$ DECEMBER $2018$

M Ltd S Ltd

Non$-$current assets K$000$ K$000$

Property, plant and equipment $2000200$

Current assets

Inventory $500120$

Trade receivables $65040$

Bank and Cash $39035$

Total Current assets $1,540195$

Total assets $3,540395$

Equity and Liabilities

Equity

Share capital $500100$

Share premium $1,500$

Revaluation surplus $50$

Retained earnings $350200$

Total equity $2,400300$

Current Liabilities

Trade payables $1,01070$

Tax $13025$

Total liabilities $1,14095$

Total equity and Liabilities $3,540395$

The following information is available

$1.$ M Ltd acquired $90\%$ of the issued share capital of S Ltd $(100,000$ K$1$ shares $)$ on $1$

January $2018$ by issuing four new K$1$ shares in M Ltd in exchange for every five shares

in S Ltd $.$ The fair Value of M Ltd$$s Shares on the date of exchange was K$5\mathrm{.}50.$ The

retained earnings of S Ltd were K$185,000$ on the date of acquisition. At this date, S

Ltd had identified a contingent liability with a fair Value of K$10,000.$ This was not

recognised in the statement of financial position. The issue to which the contingency

relates has not been settled at the reporting date; its fair Value remains K$10,000.$ The

acquisition of S Ltd has not been reflected in the draft accounts of M Ltd at $31$

December $2018$

$2.$ On $31$st December $2018$ M Ltd despatched goods which cost K$80,000$ to S Ltd$,$ at an

invoiced cost of K$100,000.$ S Ltd received the goods on $2$ January $2019$ and recorded

the transaction then.

$3.$ Included in the draft accounts of M Ltd at $31$st December $2018$ is a property with a

carrying value of K$100,000.$ Due to recent urban development, the fair value of the

property increased to K$200,000$ at $31$st December $2018.$ M Ltd has a policy of revaluing

properties, but has yet to reflect this increase in its draft accounts.

$4.$ The Non$-$ controlling interest is measured as a proportion of net assets

$5.$ Since acquisition, the market in which S Ltd operates has seen a number of New

entrants and a res