On December 31, 2016, Prime Ltd. purchased 60% of the shares of Solar Ltd. for Tk. 14,28,000.

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Question:

On December 31, 2016, Prime Ltd. purchased 60% of the shares of Solar Ltd. for Tk. 14,28,000. On that date, the carrying amount of Solar’s identifiable net assets was Tk. 20,40,000. The book values of all of Solar’s assets were equal to their fair values on acquisition date except land, which had carrying amount of Tk. 10,00,000 while market price being Tk. 10,59,500. Solar also had unrecognized trademarks that were worth Tk. 69,000. On the acquisition date, Solar’s retained earnings were Tk. 5,40,000 and the trademarks had amortization life 6 years with no residual value. An impairment loss of Tk. 85,000 occurred for the goodwill in 2020. Prior to 2020 there were no impairments. The separate financial statements provided by the accountants of Prime Ltd. and Solar Ltd are as follows: Prime Ltd. and Solar Ltd. Statements of Income and Retained Earnings For the year ended December 31, 2020 Prime Solar Sales Tk. 61,40,000 Tk. 36,85,000 Investment income 62,60,000 Costs and expenses Cost of goods sold 39,29,500 25,79,500 Depreciation, amortization & impairments 2,65,500 1,75,000 Interest expense 1,06,000 76,000 Other expense 3,96,500 1,78,000 Income tax expense 53,22,500 Net income 9,37,500 4,09,500 Retained earnings, beginning of year 17,98,500 Dividends 1,60,000 Retained earnings, end of year Tk. 14,86,000 Tk. 8,99,500 Prime Ltd. and Solar Ltd. Balance Sheets As at December 31, 2020 Prime Solar Assets Cash and receivables Tk. 11,15,000 Tk. 4,48,000 Land 20,62,000 14,25,000 Investment in Solar 14,28,000 Loan to Prime (non-current) 1,50,000 Property, plant, and equipment (net) Tk. 75,58,000 Tk. Liabilities and shareholders’ equity Current liabilities Tk. 14,22,000 Tk. 6,01,500 Long-term liabilities 26,50,000 19,00,000 Common shares 20,00,000 15,00,000 Retained earnings Tk. 75,58,000

Additional information

1) On January 1, 2020, Solar had given a loan of Tk. 150,000 to Prime none of which has been paid back to date. Solar earned Tk. 6,000 in interest on the loan, which has been reported as investment income. Prime recorded an interest expense of the same amount in its book.

2) Prime and Solar regularly trades goods between themselves. During 2020 Prime sold goods of Tk. 270,000 to Solar and purchased goods of Tk. 230,000 from Solar. None of these goods remained in the ending inventory of Prime and Solar at year end since they were all sold to third party before December 31, 2020, with at least 25% mark up.

3) Ignore the effects of necessary adjustments on income tax.

Required

Prepare consolidated financial statements on behalf of the parent company for the year ended December 31, 2020. Keep the format of the statements as provided by the accountants of Prime and Solar as presented in the question. Show all your workings in details.