Statement of profit or loss and other comprehensive income for the year ended 31 December 2019 of Kingdom Ltd and Paradise Ltd.

Additional relevant information:

i) Kingdom Ltd acquired 60% of the share capital of Paradise Ltd on 1 April 2019. The purchase consideration was settled by a share exchange transaction of two shares in Kingdom Ltd for every three acquired shares in Paradise Ltd. The share price of Kingdom Ltd at the acquisition date was GH¢3 per share. In addition, Kingdom Ltd will also pay cash consideration of GH¢0.275 pesewas on 1 April 2020 for each acquired share in Paradise Ltd. Kingdom Ltd’s cost of capital is 10% per annum. None of the consideration has been recorded by Kingdom Ltd.

ii) The fair values of Paradise Ltd’s net assets and liabilities were equal to their carrying amounts at the date of acquisition with the exception of Paradise’s property, which had a fair value of GH¢8 million above its carrying amount. For the purpose of consolidation, this led to an increase in depreciation charges (in cost of sales) of GH¢200,000 in the post-acquisition period to 31 December 2019. Paradise Ltd has not incorporated the fair value of property increase into its entity’s financial statements.

iii) The policy of Kingdom Ltd group is to value all properties to fair value at each year end. On 31 December 2019, the increase in Kingdom Ltd’s property has already been recorded. However, a further increase of GH¢1.2 million in the value of Paradise Ltd’s property since its value at acquisition to 31 December 2019 has not yet been recorded.

iv) Kingdom Ltd made sales to Paradise Ltd throughout the year 2019 and it had consistently been GH¢600,000 per month. Kingdom Ltd made a mark-up of 25% on all of these sales. A total of GH¢1.2 million (at cost to Paradise) of Paradise Ltd’s inventory at 31 December 2019 had been supplied by Kingdom Ltd during the post-acquisition period.

v) At 31 December 2019, Kingdom Ltd had a trade receivable balance owing from Paradise Ltd of GH¢ 2.4 million. However, this did not agree to the equivalent trade payable of Paradise Ltd as a result of a payment by Paradise Ltd of GH¢800,000 made in December 2019, which did not reflect in Kingdom Ltd bank account until 4 January 2020. Kingdom Ltd’s policy for cash timing differences is to adjust the parent’s financial statements.

vi) Kingdom Ltd on December 2019, accepted a GH¢1 million 10% loan note from Paradise Ltd.

vii) At 31 December 2019, the goodwill that arose on acquisition was impaired by GH¢1 million. Kingdom Ltd has a policy of treating goodwill impairment as part of administrative expense.

viii) It is the policy of Kingdom Ltd group to value the non-controlling interest at fair value. For this purpose, Paradise Ltd’s share price was trading at GH¢2.50 each at the acquisition date.

ix) Assume that all items of income and expenditure accrue evenly throughout the year except where indicated otherwise.

Required:
a) Prepare the consolidated statement of profit or loss and other comprehensive income for Kingdom Ltd group for the year ended 31 December 2019.   (10 marks)

b) Prepare the consolidated statement of financial position for Kingdom Ltd group as at 31 December 2019. (10 marks)

On 1 April 2017, Tamale Ltd acquired 60% of the 4 million ordinary shares of Navrongo Ltd in a share exchange of two shares in Tamale Ltd for three shares in Navrongo Ltd. The issue of shares has not yet been recorded by Tamale Ltd. At the date of acquisition, shares in Tamale Ltd had a market value of GH¢6 each. Below are the summarised draft financial statements of both companies.

The following information is relevant:
i) At the date of acquisition, the fair values of Navrongo Ltd’s assets were equal to their carrying amounts with the exception of an item of plant, which had a fair value of GH¢2 million in excess of its carrying amount. It had a remaining life of five years at that date (straight-line depreciation is used). Navrongo Ltd has not adjusted the carrying amount of its plant as a result of the fair value exercise.

ii) Sales from Navrongo Ltd to Tamale Ltd in the post-acquisition period were GH¢8 million. Navrongo Ltd made a markup on cost of 40% on these sales. Tamale Ltd had sold GH¢5.2 million (at cost) as at 30 September 2017.
iii) Other than where indicated, profit or loss items are deemed to accrue evenly on a time basis.
iv) Navrongo Ltd’s trade receivables at 30 September 2017 include GH¢600,000 due from Tamale Ltd which did not agree with Tamale Ltd’s corresponding trade payable. This was due to cash in transit of GH¢200,000 from Tamale Ltd to Navrongo Ltd. Both companies have positive bank balances.
v) Tamale Ltd has a policy of accounting for any non-controlling interest at fair value. The fair value of the non-controlling interest in Navrongo Ltd at the date of acquisition was estimated to be GH¢5.9 million. Consolidated goodwill was not impaired at 30 September 2017.
Required:
a) Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017.                (8 marks)

b) Prepare the consolidated statement of financial position for Tamale Ltd as at 30 September 2017.                            (12 marks)

Ghanbetter is 90% subsidiary of Asonbata that was acquired one year ago for GH¢4billion when the retained earnings of Ghanbetter were GH¢800 million. Below are the financial statements of the companies.

 Statement of Profit or Loss for the year ended 31 December, 2016.

Additional information:
i) During the year Asonbata sold goods to Ghanbetter for GH¢100 million. These goods were sold at a margin of 20% and one quarter remained in inventory at the year-end.
ii) During the year Ghanbetter sold goods to Asonbata for GH¢180 million. These goods were sold at a mark-up of 50% and one half remained in the inventory at the year -end.
iii) At the year-end there were no outstanding inter-company current account balances.

iv) At the date of acquisition the fair value of Ghanbetter’s net assets were equal to their carrying value with the exception of an item of plant that had a fair value of GH¢200 million in excess of its carrying value and a remaining useful life of four years.
v) Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose.
vi) Both companies have paid a divided during the year. The dividend distributed by Asonbata was GH¢200 million and that of Ghanbetter GH¢100 million. The investment income that Asonbata has recognised is the dividend received from Ghanbetter Shortly before the year-end.
Required:
Prepare the Consolidated Statement of Financial Position, Statement of Changes in Equity, and Consolidated Statement of Profit or Loss for Asonbata for the year ended 31 December, 2016.                                                                             (20 marks)