Bow plc acquired 75% of the shares in Tie ple on 1 January 20X1 for 80,000...

 

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Bow plc acquired 75% of the shares in Tie ple on 1 January 20X1 for £80,000 when the balance of the retained earnings of Tie was £40,000. There was no goodwill. On 10 January 20X1 Bow received a dividend of £3,000 from Tie out of the profits for the year ended 31/12/20X0. There were no inter-company transactions, other than the dividend. The summarised state- ments of comprehensive income for the year ended 31/12/20X1 were as follows: Gross profit Expenses Profit from operations Dividends received from Tie (see note) Profit before tax Income tax expense Profit for the period Bow £ 130,000 50,000 80,000 3,000 83,000 24,000 59,000 Tie £ 70,000 40,000 30,000 30,000 6,000 24,000 Consolidated £ 200,000 90,000 110,000 110,000 30,000 80,000 Whether the summarized statement of comprehensive income drawn above is correct? If yes why; If no what correction is required? (6 marks) Bow plc acquired 75% of the shares in Tie ple on 1 January 20X1 for £80,000 when the balance of the retained earnings of Tie was £40,000. There was no goodwill. On 10 January 20X1 Bow received a dividend of £3,000 from Tie out of the profits for the year ended 31/12/20X0. There were no inter-company transactions, other than the dividend. The summarised state- ments of comprehensive income for the year ended 31/12/20X1 were as follows: Gross profit Expenses Profit from operations Dividends received from Tie (see note) Profit before tax Income tax expense Profit for the period Bow £ 130,000 50,000 80,000 3,000 83,000 24,000 59,000 Tie £ 70,000 40,000 30,000 30,000 6,000 24,000 Consolidated £ 200,000 90,000 110,000 110,000 30,000 80,000 Whether the summarized statement of comprehensive income drawn above is correct? If yes why; If no what correction is required? (6 marks)

Answer rating: 100% (QA)

ANSWER No The summarised statement of comprehensive income drawn is incorrect EXPLANATION In this in... View the full answer