Crowell Company Limited is a conglomerate with investments in various sectors including hospitality, manufacturing, telecommunication, and stockbrokerage.
Question:
Crowell Company Limited is a conglomerate with investments in various sectors including hospitality, manufacturing, telecommunication, and stockbrokerage. A summary of its investments is shown below: -
Kes ‘000 | Crowell Company Limited | Usafi Company Ltd | Telair Company Ltd | Topaz Company Ltd | Bima Company Ltd |
Income statement for the year ended 30 June 2022 | |||||
Dividend income | 200,000 | - | - | - | 2,000,000 |
Interest income | 500,000 | - | - | - | 1,000,000 |
Sales income | - | 2,000,000 | 1,000,000 | 5,000,000 | - |
Total income | 700,000 | 2,000,000 | 1,000,000 | 5,000,000 | 3,000,000 |
Cost of sales | - | (1,500,000) | (700,000) | (2,000,000) | - |
Gross profit | 700,000 | 1,500,000 | 300,000 | 3,000,000 | 3,000,000 |
Operating & Administration expenses | (500,000) | (1,000,000) | (200,000) | (2,000,000) | (2,000,000) |
Finance costs | (100,000) | - | (10,000) | (500,000) | (500,000) |
Profit before income tax | 100,000 | 500,000 | 90,000 | 500,000 | 500,000 |
Income tax expense | - | (150,000) | (27,000) | (150,000) | (150,000) |
Profit after income tax | 100,000 | 450,000 | 53,000 | 350,000 | 350,000 |
Fair value gains on subsidiaries | 600,000 | - | - | - | - |
Deferred tax on revaluation of subsidiaries | (30,000) | - | - | - | - |
Total comprehensive income | 670,000 | 450,000 | 53,000 | 350,000 | 350,000 |
Crowell Company Limited | Usafi Company Ltd | Telair Company Ltd | Topaz Company Ltd | Bima Company Ltd |
Balance sheet as at 30 June 2022 | |||||
Assets | |||||
Non-current assets Investment portfolio | 230,000,000 5,000,000 | - 500,000,000 | - 20,000,000 | - 1,000,000,000 | |
- | |||||
Property, plant, and equipment | 20,000,000 | ||||
Right of use asset | 1,000,000 | 20,000,000 | 5,000,000 | 10,000,000 | - |
Deferred tax asset | - | 7,000,000 | - | - | 30,000,000 |
Intangible assets | 1,000,000 | 50,000,000 | 5,000,000 | 240,000,000 | 60,000,000 |
Total non- current assets | 237,000,000 | 577,000,000 | 30,000,000 | 1,250,000,000 | 110,000,000 |
Current assets | |||||
Receivables & prepayments | 180,000,000 | 1,000,000 | 2,000,000 | 500,000,000 | 5,000,000 |
Due from related parties | 20,000,000 | 16,000,000 | 4,000,000 | - | - |
Current income tax recoverable | 90,000,000 | - | 3,000,000 | 55,000,000 | 2,000,000 |
Cash and cash equivalents | 100,000,000 | 50,000,000 | 7,000,000 | 5,000,000 | 5,000,000 |
Total current assets | 400,000,000 | 67,000,000 | 32,000,000 | 560,000,000 | 12,000,000 |
Total assets | 637,000,000 | 644,000,000 | 62,000,000 | 1,810,000,000 | 122,000,000 |
Equity | |||||
Share Capital | 40,000,000 | 500,000 | 1,000,000 | 100,000,000 | 700,000 |
Share Premium | 360,000,000 | 1,000,000 | 2,000,000 | 200,000,000 | 1,400,000 |
Investment revaluation reserve | 50,000,000 | - | 8,000,000 | 201,000,000 | - |
Retained earnings | 50,000,000 | 63,500,000 | 22,000,000 | 19,900,000 | |
Total Equity | 500,000,000 | 65,000,000 | 33,000,000 | 501,000,000 | 22,000,000 |
Liabilities | |||||
Non-current liabilities | |||||
Borrowings | 57,000,000 | 10,000,000 | 5,000,000 | 500,000,000 | - |
Lease liability | 900,000 | 19,000,000 | 3,000,000 | 9,000,000 | - |
Total non- current liabilities | 57,900,000 | 29,000,000 | 8,000,000 | 509,000,000 | - |
Current liabilities | |||||
Payables and accruals | 43,000,000 | 500,000,000 | 5,000,000 | 600,000,000 | 60,000,000 |
Bank overdraft | 10,000,000 | 46,000,000 | - | 198,900,000 | 20,000,000 |
Due to related parties | 21,100,000 | 4,000,000 | 16,000,000 | 1,100,000 | 20,000,000 |
Total current liabilities | 79,100,000 | 550,000,000 | 21,000,000 | 800,000,000 | 100,000,000 |
Total liabilities | 137,000,000 | 579,000,000 | 29,000,000 | 1,309,000,000 | 100,000,000 |
Additional information
• Usafi Company Limited is listed on the Nairobi Securities Exchange and as at 31 December 2022, its share was trading at Kes 45. Cromwell Company owns 10,000 shares in Usafi;
• The dividend income of Kes 200 million for Cromwell was received from Usafi Company Ltd (Kes 100 million) and Bima Insurance (Kes 100 million);
• The interest income earned by Cromwell includes Kes 200m from Bima Insurance Company Limited. The outstanding loan balance as at 31 December 2022 is Kes 20mn.
Required:
I. Compute the carrying value of the investment portfolio in Cromwell Company Limited as at 30 June 2022. (20 points )
II. Prepare the consolidated financial statements of Cromwell Company Limited i.e the statement of comprehensive income and the statement of financial position as at 30 June 2022.
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella