Paint Co acquired 85% of the shares in Speed Co on 1 January 2020 when Speed...

  

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Paint Co acquired 85% of the shares in Speed Co on 1 January 2020 when Speed Co had retained earnings of BD19,000. The market price of Speed Co's shares just before the date of acquisition was BD2.000. Paint Co values non-controlling interest (NCI) at fair value. Goodwill is not impaired. The statements of financial position of Paint Co and Speed Co at 31 December 2020 and the statements of profit or loss for the year ended 31 December 2020 were as follows: Statements of Financial Position as at 31 December 2020: Assets Non-current assets Property, plant and equipment Shares in Speed Co. Current assets Inventory Trade receivables Cash and bank balances Total assets Equity and liabilities Share capital - BD1.00 shares Retained earnings Current liabilities Trade and other payables Bank overdraft Total equity and liabilities Paint Co. Speed BD Co. BD 82,000 93,200 175,200 68,000 68,000 8,000 10,000 20,000 12,000 40,800 21,000 68,800 43,000 244,000 111,000 4,000 6,000 10,000 138,000 68,000 96,000 33,000 234,000 101,000 5,000 5,000 10,000 244,000 111,000 Additional Information: Statements of Profit or Loss for the year ended 31 December 2020: (b) Revenue Cost of sales Gross profit Administrative expenses Profit before tax Income tax expense Profit for the year (c) (d) Paint Co. BD 61,000 (18,000) 43,000 (2,000) 41,000 (3,000) 38,000 Speed Co. BD Speed Co had recorded cash sales of BD8,000 to Paint Co during 2020. Speed Co had purchased these goods from outside vendors at a cost of BD6,000. One half of the goods remained in Paint Co's inventory at 31 December 2020. 24,000 (8,000) 16,000 Required: Using the above information and assuming the role of senior accountant: (a) Prepare the consolidated statement of financial position of the Paint Co Group as at 31 December 2020 (Note: show your workings). (18 Marks) Prepare the consolidated statement of profit or loss of the Paint Co Group for the year ended 31 December 2020 (Note: show your workings). (10 Marks) (1,000) 15,000 (1,000) 14,000 Calculate TWO profitability ratios and TWO short-term liquidity & efficiency ratios (to two decimal places where appropriate) for Paint Co Group for the period ended 31 December 2020 (Note: show your computations). (8 Marks) Prepare a memo for the management of Paint Co Group based on a review of the group's performance for the year ended 31 December 2020. (Note: your memo should interpret appropriate ratios, include relevant recommendations for the group, and highlight the key limitations of the financial statements and interpretation techniques). (10 Marks) Paint Co acquired 85% of the shares in Speed Co on 1 January 2020 when Speed Co had retained earnings of BD19,000. The market price of Speed Co's shares just before the date of acquisition was BD2.000. Paint Co values non-controlling interest (NCI) at fair value. Goodwill is not impaired. The statements of financial position of Paint Co and Speed Co at 31 December 2020 and the statements of profit or loss for the year ended 31 December 2020 were as follows: Statements of Financial Position as at 31 December 2020: Assets Non-current assets Property, plant and equipment Shares in Speed Co. Current assets Inventory Trade receivables Cash and bank balances Total assets Equity and liabilities Share capital - BD1.00 shares Retained earnings Current liabilities Trade and other payables Bank overdraft Total equity and liabilities Paint Co. Speed BD Co. BD 82,000 93,200 175,200 68,000 68,000 8,000 10,000 20,000 12,000 40,800 21,000 68,800 43,000 244,000 111,000 4,000 6,000 10,000 138,000 68,000 96,000 33,000 234,000 101,000 5,000 5,000 10,000 244,000 111,000 Additional Information: Statements of Profit or Loss for the year ended 31 December 2020: (b) Revenue Cost of sales Gross profit Administrative expenses Profit before tax Income tax expense Profit for the year (c) (d) Paint Co. BD 61,000 (18,000) 43,000 (2,000) 41,000 (3,000) 38,000 Speed Co. BD Speed Co had recorded cash sales of BD8,000 to Paint Co during 2020. Speed Co had purchased these goods from outside vendors at a cost of BD6,000. One half of the goods remained in Paint Co's inventory at 31 December 2020. 24,000 (8,000) 16,000 Required: Using the above information and assuming the role of senior accountant: (a) Prepare the consolidated statement of financial position of the Paint Co Group as at 31 December 2020 (Note: show your workings). (18 Marks) Prepare the consolidated statement of profit or loss of the Paint Co Group for the year ended 31 December 2020 (Note: show your workings). (10 Marks) (1,000) 15,000 (1,000) 14,000 Calculate TWO profitability ratios and TWO short-term liquidity & efficiency ratios (to two decimal places where appropriate) for Paint Co Group for the period ended 31 December 2020 (Note: show your computations). (8 Marks) Prepare a memo for the management of Paint Co Group based on a review of the group's performance for the year ended 31 December 2020. (Note: your memo should interpret appropriate ratios, include relevant recommendations for the group, and highlight the key limitations of the financial statements and interpretation techniques). (10 Marks)