This assignment involves preparing various financial statements for a company, including the consolidated income statement, balance sheet, and equity statement. The solution provides detailed calculations and formulas for each section, making it a comprehensive guide for students studying accounting and finance.
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FINANCIAL MANAGEMENT
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Table of Contents Answer.............................................................................................................................................1 (I) Journal entries for Peace Ltd and Sublime Ltd......................................................................1 (ii) Detailed consolidation Worksheet........................................................................................2 (iii)(a) Statement of profit and Loss............................................................................................3 (iii)(b) Statement of equity..........................................................................................................4 (iii)(c) Statement of financial position........................................................................................4
Index of Tables Table 1: Journal entries in the books of Sublime Ltd......................................................................1 Table 2: Journal entries in the books of Peace ltd...........................................................................1 Table 3: Consolidated worksheet for the companies.......................................................................2 Table 4: Consolidated income statement.........................................................................................3 Table 5: Consolidated statement of equity.......................................................................................4 Table 6: Consolidated Balance Sheet..............................................................................................4
Answer (I) Journal entries for Peace Ltd and Sublime Ltd Table1: Journal entries in the books of Sublime Ltd Journal Entries In the books of Sublime Ltd ParticularsAmount DebitCredit Payables a/c Dr17400 Advance from Peace Ltd.5000 To Realisation a/c.22400 (Being liabilities account closed) Realisation a/c Dr53740 To Inventory a/c25000 To Equipment a/c12000 To Machinery a/c7500 To Land a/c9240 (Being assets account closed) Machinery a/c Dr600 To Depreciation a/c600 (Machinery depreciated by 10%) Table2: Journal entries in the books of Peace ltd Journal entries In the books of Peace Ltd ParticularsAmount DebitCredit Business purchase a/c Dr68600 1
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To Sublime Ltd68600 (Being business purchased) Retained earnings a/c Dr68600 To Business purchase a/c68600 (Amount transferred to General reserve) Other current assets1550 Inventory a/c Dr25000 Equipment a/c Dr12000 Machinery a/c Dr7500 Land a/c Dr924055290 To payables a/c17400 To Advance from Peace Ltd5000 To goodwill a/c32890 (Being Goodwill amount calculated) Retained earnings a/c Dr3210 To Purchase consideration a/c3210 Share capital a/c Dr3210 To retained earnings a/c3210 Reserves a/c Dr5850 To Bonus shares a/c5850 (ii) Detailed consolidation Worksheet Table3: Consolidated worksheet for the companies Consolidation worksheet ItemsPeace LtdSublime LtdAdjustmentsConsolidated 2
DebitCreditDebitCreditDebitCreditDebitCredit Inventory857903516016000136950 Other current assets431015505860 Deferred tax assets8100370011800 Machinery140001100025000 Land—1224012240 Equipment170001865035650 Cost of sales3250026750600065250 Other expenses110001350024500 Income tax expense36001000746012060 Interim dividend paid200010003000 Final dividend declared500015006500 Advance to Sublime Ltd500005000 256 900 126 050 Share capital85000330005850112150 General reserve2050015000328902610 Retained earnings (1/7/16)80001775025750 Debentures60000060000 Final dividend payable500015006500 Current tax liabilities400012505250 Other payable17400505022450 Advance from Peace Ltd050005000 Sales425003250075000 Other revenue95001050020000 Gains/(losses) on sale of non-current assets20005002500 Accumulated Depreciation – 200010003000 3
machinery Accumulated Depreciation – Equipment100030004003600 256900126050343810343810 Bonus shares = (28500/30)*3 = 5850 Depreciation @ 10% (iii)(a) Statement of profit and Loss Table4: Consolidated income statement Consolidated Income statement ParticularsAmount Sales75000 Less: Cost of sales65250 Gross profits9750 Less: Expenses Other24500 Interim dividend paid3000 Final dividend declared6500 Depreciation (Machinery)3000 Depreciation (Equipments)3600 Advance to sublime500045600 Add: Revenues Advance from peace Ltd5000 Gains on sale of non current assets2500 Other revenue20000 Final dividend payable650034000 Net Profit/ (Loss)-1850 Less: Income tax expense12060 Net profit after tax-13910 4