On 1 January 2017, Pyramids Co. acquired 80% of the ordinary share capital of Sphinx Co....

 

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On 1 January 2017, Pyramids Co. acquired 80% of the ordinary share capital of Sphinx Co. when the retained earnings balance was £48,000. The statement of financial position and statement of profit or loss for the year ended 31 December 2019 are set out below: Non-current Assets Property, plant and equipment Investment in Sphinx Co. Statement of Financial Position as at 31 December 2019 Pyramids Co. Current Assets Inventories Trade Receivables Cash Total Assets Equity Share capital (£1 ordinary share) Retained earnings Current liabilities Trade Payables Total Equity and liabilities Revenues Cost of sales Gross profit Distribution and administration expenses Profit from operation Income from investment Profit before tax Tax Profit of the year Additional information: Plant assets Excess of fair value over carrying value Inventory 5,000 165,000 172,000 337,000 288,000 206,000 31.000 20,000 525,000 862,000 300,000 220,000 $20,000 342,000 862,000 Statement of Profit or Loss for the year ended 31 December 2019 Pyramids Co. £ 100,000 (65,000) 35.000 (5500) 29.500 10,000 Sphinx Co. £ 39,500 (12,000) 27.500 120,000 120,000 175,000 125,000 8,000 308,000 428,000 72,000 98,000 170,000 258,000 428,000 1. At the date of acquisition, the fair value of Sphinx assets and liabilities are equal to their carrying value except for the following: Sphinx Co. £ 90,000 (60,000) 30,000 (4000) 26,000 26,000 (9000) 17,000 Sphinx used FIFO and the inventory has been sold in the first year after acquisition Straight-line method over remaining life of 5 years. The group policy is to charge fair value depreciation to cost of sales. 2. The group policy is to evaluate NCI at fair value. At acquisition date, the fair value of NCI is £33,000. 3. During 2019, goodwill has been tested for impairment and it is concluded that goodwill should be impaired by £7,000. Cumulative impairment loss on recognized goodwill amounted to £3,000 at 31 December 2018. The group policy is to charge goodwill impairment loss to distribution and administrative expenses. 4. During 2019, Pyramids Co. sold goods to Sphinx Co. for £15,000 (invoice price). Sphinx Co. had sold 40% of these goods by 31 December 2019. Pyramids Co marked up is 20%. 5. During 2019, Sphinx Co. sold goods to Pyramids Co. for £18,000 (cost of inventory). Pyramids Co. hold 50% of these goods by 31 December 2019. Sphinx Co price these goods at a margin of 10% of sales. 6. During 2019, sphinx Co. paid total dividends of £10,000. 7. Sphinx Co. trade receivables at 31 December 2019 include £25,000 due from Pyramids Co. which did not agree with Pyramids Co. related trade payables. This was due to cash in-transit of £5,000 from Pyramids Co. to Sphinx Co. Required: 1. Prepare the consolidated statement of financial position for Pyramids Co. Group for the year ended 31 December 2019. (25 marks) 2. Prepare the consolidated statement of profit of loss for Pyramids Co. Group for the year ended 31 December 2019. On 1 January 2017, Pyramids Co. acquired 80% of the ordinary share capital of Sphinx Co. when the retained earnings balance was £48,000. The statement of financial position and statement of profit or loss for the year ended 31 December 2019 are set out below: Non-current Assets Property, plant and equipment Investment in Sphinx Co. Statement of Financial Position as at 31 December 2019 Pyramids Co. Current Assets Inventories Trade Receivables Cash Total Assets Equity Share capital (£1 ordinary share) Retained earnings Current liabilities Trade Payables Total Equity and liabilities Revenues Cost of sales Gross profit Distribution and administration expenses Profit from operation Income from investment Profit before tax Tax Profit of the year Additional information: Plant assets Excess of fair value over carrying value Inventory 5,000 165,000 172,000 337,000 288,000 206,000 31.000 20,000 525,000 862,000 300,000 220,000 $20,000 342,000 862,000 Statement of Profit or Loss for the year ended 31 December 2019 Pyramids Co. £ 100,000 (65,000) 35.000 (5500) 29.500 10,000 Sphinx Co. £ 39,500 (12,000) 27.500 120,000 120,000 175,000 125,000 8,000 308,000 428,000 72,000 98,000 170,000 258,000 428,000 1. At the date of acquisition, the fair value of Sphinx assets and liabilities are equal to their carrying value except for the following: Sphinx Co. £ 90,000 (60,000) 30,000 (4000) 26,000 26,000 (9000) 17,000 Sphinx used FIFO and the inventory has been sold in the first year after acquisition Straight-line method over remaining life of 5 years. The group policy is to charge fair value depreciation to cost of sales. 2. The group policy is to evaluate NCI at fair value. At acquisition date, the fair value of NCI is £33,000. 3. During 2019, goodwill has been tested for impairment and it is concluded that goodwill should be impaired by £7,000. Cumulative impairment loss on recognized goodwill amounted to £3,000 at 31 December 2018. The group policy is to charge goodwill impairment loss to distribution and administrative expenses. 4. During 2019, Pyramids Co. sold goods to Sphinx Co. for £15,000 (invoice price). Sphinx Co. had sold 40% of these goods by 31 December 2019. Pyramids Co marked up is 20%. 5. During 2019, Sphinx Co. sold goods to Pyramids Co. for £18,000 (cost of inventory). Pyramids Co. hold 50% of these goods by 31 December 2019. Sphinx Co price these goods at a margin of 10% of sales. 6. During 2019, sphinx Co. paid total dividends of £10,000. 7. Sphinx Co. trade receivables at 31 December 2019 include £25,000 due from Pyramids Co. which did not agree with Pyramids Co. related trade payables. This was due to cash in-transit of £5,000 from Pyramids Co. to Sphinx Co. Required: 1. Prepare the consolidated statement of financial position for Pyramids Co. Group for the year ended 31 December 2019. (25 marks) 2. Prepare the consolidated statement of profit of loss for Pyramids Co. Group for the year ended 31 December 2019.

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