AC AC2091 Financial Reporting Assignment 2

The income statements for Animal Ltd, Lion Ltd and Tiger Ltd for the year ended 31 December 2017
are given as follows:

Animal Ltd Lion Ltd Tiger Ltd

£'000 £'000 £'000
Sales 7,000 3,500 2,500
Cost of sales -2,700 -1,200 -1,000
Gross profit 4,300 2,300 1,500
Dividends Income 150 - -
Administration costs -420 -310 -150
Distribution costs -210 -430 -80
Operating profit 3,820 1,560 1,270
Interest receivable 110 - -
Interest payable -30 -50 -
Profit before tax 3,900 1,510 1,270
Tax -250 -150 -50
Profit after tax 3,650 1,360 1,220
Dividends Paid -400 -100 -130
Profit for the year 3,250 1,260 1,090
Retained profit brought forward 2,700 1,180 900
Retained profit carried forward 5,950 2,440 1,990

Animal Ltd acquired 60 % of Lion Ltd on 1 January 2008 for £400,000 when Lion’s Share Capital and
Reserves were £240,000. The share capital of Lion Ltd totals £80,000

Interest payable by Lion Ltd is in respect of a Loan Stock issue of which 80% was acquired by Animal
Ltd.

Animal Ltd acquired 30% of Tiger Ltd for £400,000 when Tiger Ltd’s share capital and reserves were
£150,000 on 1 January 2010. The share capital of Tiger Ltd is 60,000 50p shares.

During the year Lion Ltd sold goods costing £10,000 to Animal Ltd for £30,000. 20% of this inventory
is included in Animal Ltd’s inventory at the year-end.

During the year Tiger Ltd sold goods costing £10,000 to Animal Ltd for £16,000. 50% of this inventory
is still in Animal Ltd’s inventory at the year-end.

Impairment of 50% of the value of the goodwill of Lion Ltd was seen in 2015 and impairment of 20% of
the value of the goodwill in Tiger Ltd is seen in 2017.

At the year-end Animal Ltd charges both Lion Ltd and Tiger Ltd a management fee of 5% of turnover.
None of the companies has accounted for this management fee.

Required:

Prepare the consolidated income statement for Animal Ltd for the year ended 31 December 2017. (20
marks)

1
STUDENT FULL NAME: _____________________________CLASS: ___________

ATTENTION
1. Structure: P___________ S_____________ A_____________
2. Pre and Post net assets considered
3. Goodwill for both S and A
4. (i) Adjust numbers (ii) contra/eliminate interco (iii) aggregate all Income and Expenses of S
5. Associate profit is one-line share of profit before tax and the tax of Assoc post acquisition.
6. NCI is share of S profits after tax after all adjustments to S
7. Retained profit B/F from S and A include only post acquisition after adjustment

Animal Group. Consolidated income statement for the year ended 31 December 2017

£'000
Sales
Cost of sales
Gross profit

Administration costs
Distribution costs
Operating profit
Management Fee from Associate
Investment Income
Interest receivable
Interest payable
Share of Associate profit
Goodwill Impairment
Profit before tax
Tax
Profit after tax
Non-Controlling Interest
Dividends Paid
Profit for the year
Retained profit brought forward
Retained profit carried forward