Entity P acquired 100% of the equity shares of Entity S at a cost of $750,000 on
Question:
Entity P acquired 100% of the equity shares of Entity S at a cost of $750,000 on October Year 2 when the net assets of Entity S were $600,000. Entity P prepares its
financial statements to 31 December each year. The income statement for each entity for the year to 31 December Year 2 was as follows
Entity P Entity S
Revenue 400,000 260,000
Cost of sales -200,000 -60,000
Gross profit 200,000 200,000
Other income 20,000 -
Distribution costs -50,000 -30,000
Administrative expenses -60,000 -80,000
Other expenses -20,000 -10,000
Finance costs -10,000 -5,000
Profit before tax 80,000 75,000
Income tax expense -30,000 -15,000
Profit for the period 50,000 60,000
Required
Prepare a consolidated income statement for the year to 31 December Year 2, assuming there is no impairment of goodwill during the year.
Expert Answer:
