P Ltd acquired 60% of the share capital of S Ltd on 1 September 2021 for...

  

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P Ltd acquired 60% of the share capital of S Ltd on 1 September 2021 for $4,000,000. The year-end of P Ltd and S Ltd is 31 December. Assume all income and expenses are deemed to accrue evenly throughout the year and no dividends were declared or paid in 2021. The table below shows the consolidated statement of profit or loss prepared by an accountant. The statements of profit or loss of P Ltd and S Ltd, for the year ended 31 December 2021, are shown in the first two columns, and the group's statement of profit or loss is shown in the last column. The figures of the group were obtained by adding those of P Ltd and S Ltd. For example, P Ltd's sales of $100,150 plus S Ltd's sales of $100,076 equals the group's figure of $200,226. Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Profits before tax Tax expense Profits after tax P Ltd $ 1 S Ltd $ Group $ 100,150 100,076 200,226 -10,060 -10,040 -20,100 90,090 90,036 180,126 -10,020 -10,012 -10,008 -10,004 70,062 70,020 -10,020 -10,005 60,042 -20,032 -20,012 140,082 -20,025 60,015 120,057 Requirements: Refer to the Group's figures above (figures in bold) and comment if the figures are correct or not. Explain and justify your view. (10 marks) (Note: please consider the pre-acquisition and post-acquisition profits, and the disclosure requirements in the consolidated statement of profit or loss.) 2 Compute the consolidated statement of profit or loss for the year ended 31 December 2021. (10 marks) (Correct to the nearest dollar where necessary.) P Ltd acquired 60% of the share capital of S Ltd on 1 September 2021 for $4,000,000. The year-end of P Ltd and S Ltd is 31 December. Assume all income and expenses are deemed to accrue evenly throughout the year and no dividends were declared or paid in 2021. The table below shows the consolidated statement of profit or loss prepared by an accountant. The statements of profit or loss of P Ltd and S Ltd, for the year ended 31 December 2021, are shown in the first two columns, and the group's statement of profit or loss is shown in the last column. The figures of the group were obtained by adding those of P Ltd and S Ltd. For example, P Ltd's sales of $100,150 plus S Ltd's sales of $100,076 equals the group's figure of $200,226. Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Profits before tax Tax expense Profits after tax P Ltd $ 1 S Ltd $ Group $ 100,150 100,076 200,226 -10,060 -10,040 -20,100 90,090 90,036 180,126 -10,020 -10,012 -10,008 -10,004 70,062 70,020 -10,020 -10,005 60,042 -20,032 -20,012 140,082 -20,025 60,015 120,057 Requirements: Refer to the Group's figures above (figures in bold) and comment if the figures are correct or not. Explain and justify your view. (10 marks) (Note: please consider the pre-acquisition and post-acquisition profits, and the disclosure requirements in the consolidated statement of profit or loss.) 2 Compute the consolidated statement of profit or loss for the year ended 31 December 2021. (10 marks) (Correct to the nearest dollar where necessary.)

Answer rating: 100% (QA)

Sol 1 The given statement of profit and loss is not as per the requirements of standard We ... View the full answer