1. Advanced Financial Accounting Lec-43 Main Ahmad Farhan

2. Question Income Statement For the year ended 2000 Rs. Sales7,5004,000 Less Cost of goods sold 4,5002,900 Gross profit3,0001,100 Less Operating expenses 1,800600 Operating profit1,200500 Add Dividend income100--- Net profit before tax1,300500 Less Income tax520200 Net profit after tax780300 Less Dividend paid250125 Net profit after dividend payment 530175 Add Opening retained profit 1,000450 Closing retained profit1,530625

3. Question The Parent Co. acquired 80% equity of Subsidiary Co. on 1 st Jan 2003 for Rs. 1,700 when S paid share capital was Rs. 1,250 and it’s reserves were worth Rs. 50. All goodwill has been impaired. Required: Prepare the consolidated Income Statement for the year ended for 31-12-2008.

4. Working (Profit After Tax) P Co. = 300 x 80% = 240 S Co. = 300 x 20% = 60

5. Working (Dividend) P Co. = 125 x 80% = 100 S Co. = 125 x 20% = 25

6. Working Holding % = 80% Minority % = 20%

7. Working (Goodwill) Cost of investment 1,700 Less Ordinary share capital of S (1,300 x 80%)1,040 Less Goodwill 660 Less Impairment of owner’s equity 660 0

8. Working Minority Interest Due to ordinary share-holder 300 x 20% = 60

9. Working (Opening Balance of Group Retained Profit) Post-acquisition part of opening retained of S Co. to the extent of holding % 320 Add Total opening balance of retained profit of P Co. 1,000 Opening balance of group retained profit 1,320 Less Goodwill Amortization 660 Closing balance 660

10. Solution Consolidated Income Statement For the year ended 31 st Dec. 2000 Sales 11,500 Less Cost of goods sold 7,400 Gross profit 4,100 Less Operating expenses 2,400 Operating profit 1,700 Less Income tax 720 Net profit after tax 980 Less Minority interest 60 920 Less Dividend paid 250 670 Opening balance group retained profit 660 Closing balance group retained profit 1,330

11. Question Income Statement For the year ended 2000 Rs. Sales7,5004,000 Less Cost of goods sold 4,5002,900 Gross profit3,0001,100 Less Operating expenses 1,800600 Operating profit1,200500 Add Dividend income100--- Net profit before tax1,300500 Less Income tax520200 Net profit after tax780300 Less Ordinary dividend paid 250125 Net profit after dividend payment 530175 Add Opening retained profit 1,000450 Closing retained profit1,530625

12. Question The Parent Co. acquired 80% equity of Subsidiary Co. on 1 st Jan 2003 for Rs. 1,700 when S paid share capital was Rs. 1,250 and it’s reserves were worth Rs. 50. During the year S sold to P goods costing Rs. 1,000 and selling price Rs. 1,250. Total goodwill has been impaired so-far. Required: Prepare the consolidated Income Statement for the year ended for 31-12-2008.

13. Working Holding % = 80% Minority % = 20%

14. Working (Goodwill) Cost of investment 1,700 Ordinary share capital of S (1,250+50 x 80%)1,040 Goodwill 660 Less Impairment of owner’s equity 660 0

15. Working (Opening Balance of Group Retained Profit) Opening balance of retained profit of P Co. 1,000 Post-acquisition part of opening retained of S Co. to the extent of holding % (450-50)x80%320 1,320 Less Goodwill Amortization 660 Closing balance 660

16. Working Minority Interest Profit after tax of Subsidiary Co. x Minority interest 300 x 20% = 60

17. Working Consolidated Sales Sales of parent Co. 7,500 Add Sales of subsidiary Co.4,000 Less Sales made by subsidiary Co. 1,250 Consolidated sales 10,250

18. Working Cost of Goods Sold Cost of goods sold of parent Co. 4,500 Add Cost of goods sold of subsidiary Co.2,900 Less Increase in purchase of parent Co. 1,250 Add Unrealized profit 40 6,190

19. Solution Consolidated Income Statement For the year ended 31 st Dec. 2000 Sales 10,250 Less Cost of goods sold 6,150 Gross profit 4,100 Less Operating expenses 2,400 Operating profit 1,700 Less Income tax 720 Net profit after tax 980 Less Minority interest 52 928 Less Dividend paid 250 670 Opening balance group retained profit 660 Closing balance group retained profit 1,330