The draft income statements of Lampard plc, Rekik Limited and Sanya Limited for the year ended...

 

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The draft income statements of Lampard plc, Rekik Limited and Sanya Limited for the year ended 31 December 2014 are given below. Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Income from shares in other companies Profit before taxation Taxation Profit after taxation Lampard plc £m 25,363 (13,860) 11,503 Goodwill balance at 1 January 2014 Goodwill balance at 31 December 2014 7,940 (2,325) 5,615 (1,665) (1,170) (1,998) (1,410) 7,840 2,550 100 (750) Rekik Limited £m 10,965 (5,835) 5,130 4,865 7,950 12,815 2,550 (900) 1,650 (100 1,550 3,600 5,150 Sanya Limited £m 3,660 (2,484) 1,176 0 90 72 (264) (282) Dividends Retained profit for the year Retained earnings at 1 January 2014 Retained earnings at 31 December 2014 The following further information is available. (1) On 1 January 2009, Lampard plc paid £2,700m to acquire 2,250m of the issued 3,000m ordinary shares of £1 each in Rekik Limited. The balance on the retained earnings of Rekik Limited on 1 January 2009 was £360m. £m 630 in de 630 (150) 480 (2) On 1 January 2011, Lampard plc purchased 480m of the issued 1,200m ordinary shares of £1 each in Sanya Limited when the balance on the retained earnings reserve of Sanya Limited was £240m. Following the acquisition of these shares, Lampard plc was able to exercise a significant influence over the nancial and operating policies of Sanya Limited. (3) Following an impairment review of goodwill, the balances on goodwill at 1 January 2014 and 31 December 2014 following the acquisition of Rekik Limited were as follows: 480 1,200 1,680 (4) There had been an annual impairment review of the investment in Sanya Limited and this has declined by £18m in the two years to 31 December 2013 and by a further £6m in the year to 31 December 2014. (5) During the financial year to 31 December 2014, Lampard plc sold goods costing £500m to Rekik Limited for £650m. All of these goods had been sold by Rekik Limited to third parties for £700m. (6) During the financial year to 31 December 2014, Rekik Limited sold goods to Lampard plc for £200m that had cost it £150m. These goods were still included in Lampard plc's inventory at 31 December 2014. The profit on the sale made by Rekik Limited to Lampard plc is 25 percent of the selling price charged by Rekik Limited. REQUIRED (a) Calculate the goodwill arising on the acquisition of Rekik Limited by Lampard plc. (You should work to the nearest £m.) (5 marks) (b) Prepare the consolidated statement of comprehensive income of the Lampard Group plc for the year ended 31 December 2014. (You should work to the nearest £m.) (35 marks) (c) Calculate the balance on the retained earnings reserve of the Lampard Group plc at 31 December 2014. (You should work to the nearest £m.) (10 marks) The draft income statements of Lampard plc, Rekik Limited and Sanya Limited for the year ended 31 December 2014 are given below. Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Income from shares in other companies Profit before taxation Taxation Profit after taxation Lampard plc £m 25,363 (13,860) 11,503 Goodwill balance at 1 January 2014 Goodwill balance at 31 December 2014 7,940 (2,325) 5,615 (1,665) (1,170) (1,998) (1,410) 7,840 2,550 100 (750) Rekik Limited £m 10,965 (5,835) 5,130 4,865 7,950 12,815 2,550 (900) 1,650 (100 1,550 3,600 5,150 Sanya Limited £m 3,660 (2,484) 1,176 0 90 72 (264) (282) Dividends Retained profit for the year Retained earnings at 1 January 2014 Retained earnings at 31 December 2014 The following further information is available. (1) On 1 January 2009, Lampard plc paid £2,700m to acquire 2,250m of the issued 3,000m ordinary shares of £1 each in Rekik Limited. The balance on the retained earnings of Rekik Limited on 1 January 2009 was £360m. £m 630 in de 630 (150) 480 (2) On 1 January 2011, Lampard plc purchased 480m of the issued 1,200m ordinary shares of £1 each in Sanya Limited when the balance on the retained earnings reserve of Sanya Limited was £240m. Following the acquisition of these shares, Lampard plc was able to exercise a significant influence over the nancial and operating policies of Sanya Limited. (3) Following an impairment review of goodwill, the balances on goodwill at 1 January 2014 and 31 December 2014 following the acquisition of Rekik Limited were as follows: 480 1,200 1,680 (4) There had been an annual impairment review of the investment in Sanya Limited and this has declined by £18m in the two years to 31 December 2013 and by a further £6m in the year to 31 December 2014. (5) During the financial year to 31 December 2014, Lampard plc sold goods costing £500m to Rekik Limited for £650m. All of these goods had been sold by Rekik Limited to third parties for £700m. (6) During the financial year to 31 December 2014, Rekik Limited sold goods to Lampard plc for £200m that had cost it £150m. These goods were still included in Lampard plc's inventory at 31 December 2014. The profit on the sale made by Rekik Limited to Lampard plc is 25 percent of the selling price charged by Rekik Limited. REQUIRED (a) Calculate the goodwill arising on the acquisition of Rekik Limited by Lampard plc. (You should work to the nearest £m.) (5 marks) (b) Prepare the consolidated statement of comprehensive income of the Lampard Group plc for the year ended 31 December 2014. (You should work to the nearest £m.) (35 marks) (c) Calculate the balance on the retained earnings reserve of the Lampard Group plc at 31 December 2014. (You should work to the nearest £m.) (10 marks)

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a Calculation of goodwill arising on the acquisition of Rekik Limited by Lampard plc Goodwill at 1 J... View the full answer