Answered Essay: At date of acquisition – 30 September 2017 Hope acquired 75% of the shares and 20% of the 5% bonds in Anne. The purchase consideration (amount paid) was K10,000 more than book value. The book value and fair value were the same amount. The retained earnings of the Hope Group were K69,336. During the year All income and expenses are deemed to accrue evenly through the year and the dividend receivable may be apportioned to pre- and post-acquisition on a time basis. On 30 June 2017 Hope sold Anne goods for K4,000 plus a mark-up of one-third. At end of financial year The Hope Group prepares its accounts as at 31 December each year. Half of the intra-group goods were still in inventory at the end of the year. Set out below are the individual statements of comprehensive income of Hope and Anne together with the consolidated statement of comprehensive income for the year ended 31 December 2017. Hope Anne K K Revenue 200,000 120,000 Cost of sales (60,000) (60,000) Gross profit 140,000 60,000 Expenses (59,082) (30,000) Interest paid on 5% bonds 0 (10,000) Interest received on Loose bonds 2,000 0 82,918 20,000 Dividends Received 3,600 0 Profit Before Tax 86,518 20,000 Income Tax Expense (14,004) (6,000) Profit for the Period After tax 72,514 14,000 Required Prepare Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Group as at 31 December 2017. [TOTAL 20 Marks] View comments (1)

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At date of acquisition – 30 September 2017

Hope acquired 75% of the shares and 20% of the 5% bonds in Anne. The purchase consideration (amount paid) was K10,000 more than book value. The book value and fair value were the same amount. The retained earnings of the Hope Group were K69,336.

During the year

All income and expenses are deemed to accrue evenly through the year and the dividend receivable may be apportioned to pre- and post-acquisition on a time basis. On 30 June 2017 Hope sold Anne goods for K4,000 plus a mark-up of one-third.

At end of financial year

The Hope Group prepares its accounts as at 31 December each year. Half of the intra-group goods were still in inventory at the end of the year.

Set out below are the individual statements of comprehensive income of Hope and Anne together with the consolidated statement of comprehensive income for the year ended 31 December 2017.

Hope Anne

   K K

Revenue 200,000 120,000

Cost of sales (60,000) (60,000)

Gross profit   140,000 60,000

Expenses (59,082) (30,000)

Interest paid on 5% bonds 0 (10,000)

Interest received on Loose bonds 2,000 0

82,918   20,000

Dividends Received 3,600 0

Profit Before Tax 86,518 20,000

Income Tax Expense (14,004) (6,000)

Profit for the Period After tax 72,514 14,000

Required

Prepare Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Group as at 31 December 2017. [TOTAL 20 Marks]

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