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Marks attained:
AC2091 Financial Reporting
Assignment 1
20

The financial statements for the year ended 30 September 2021 for Oliver Ltd, Moby Ltd
and Grace Ltd are given as follows:

Income Statement for the year ended 30 September 2021

Oliver Ltd Moby Ltd Grace Ltd
£’000 £’000 £’000
Sales 15,300 10,200 7,400
Cost of sales (8,600) (5,900) (4,200)
Gross profit 6,700 4,300 3,200
Other income 250 180 20
Operating expenses (1,600) (1,100) (850)
Profit before tax 5,350 3,380 2,370
Tax expense (600) (250) (180)
Profit after tax 4,750 3,130 2,190

Statement of Financial Position as at 30 September 2021

Oliver Ltd Moby Ltd Grace Ltd
£’000 £’000 £’000
Freehold land 15,600 8,400 4,200
Equipment (net) 8,200 4,080 2,590
Investments 4,000 1,200 450
Inventories 2,580 1,850 1,350
Trade and other receivables 2,950 1,200 900
Dividends receivable 120 - -
Cash 1,500 1,100 700
34,950 17,830 10,190

Share capital (£1 par) 6,000 1,400 800

General reserve 200 - 300
Retained earnings 24,950 12,910 7,330
5% Debentures - 800 200
Trade and other payables 3,500 2,600 1,500
Dividends payables 300 120 60
34,950 17,830 10,190

Additional information

(i) The group measures any non-controlling interests at their proportionate share of the
fair value of the subsidiaries’ net identifiable assets.

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Name: Student ID: Class:

(ii) Oliver Ltd [“Oliver”] acquired 85% of Moby Ltd [“Moby”] on 1 October 2014 for
£1,300,000, when the share capital and reserves of Moby were £2,200,000. There
has been no change in the issued share capital of Moby since that day. At the date of
acquisition, the fair value of Moby’s freehold land was £8,200,000. Moby has not
accounted for this revaluation and there has been no acquisition and disposal of
freehold land by Moby since 1 October 2014.

(iii) Oliver acquired 30% of Grace Ltd [“Grace”] on 1 October 2017 for £500,000, when
the retained earnings and general reserve of Grace were £400,000 and £200,000
respectively. There has been no change in the issued share capital of Grace since its
incorporation.

(iv) On 1 October 2020, Oliver acquired 75% and 50% of the debentures of Moby and
Grace respectively. These debentures had been issued at par by both companies.
Interest for the year ended 30 September 2021 has been paid by both issuers and
accounted for accordingly by all three companies.

(v) In the year ended 30 September 2021, Moby sold goods to Oliver for £300,000 at a
mark-up of 20%. Half of these goods are still unsold as at year-end. Oliver sold
Grace inventory which had cost £30,000 for £40,000 and all of them are still unsold
at year-end. At year-end, Oliver owed Moby £150,000 but Moby Ltd had an
outstanding balance of £200,000 in its books. Grace owed Oliver £30,000 but Oliver
recorded that Grace owed it £40,000. The differences are attributed to cash in transit.
Outstanding balances have been recorded in trade and other receivables/payables
accounts for the relevant parties.

(vi) On 1 April 2021, equipment which originally cost Moby Ltd £110,000 was sold to
Oliver Ltd for £60,000. Accumulated depreciation relating to the equipment sold
amounted to £70,000. As at the date of disposal, the equipment had a remaining
useful life of 2 years with no residual value.

(vii) Oliver Ltd charges both Moby Ltd and Grace Ltd a management fee of 5% on
revenue. None of the companies has accounted for this management fee and the
management fee remains unpaid as at 30 September 2021.

(viii) Impairment of 20% of the value of the goodwill of Grace Ltd is seen in the year ended
30 September 2019 and a further £14,000 in the current financial year.

(ix) The following information has been extracted from the companies’ records:
Oliver Ltd Moby Ltd Grace Ltd
£’000 £’000 £’000
Retained earnings as at 1 October 2020 20,500 9,900 5,200
Dividends declared 300 120 60

Required:

Prepare the following for Oliver Ltd Group:

a) Consolidated Income Statement for the year ended 30 September 2021, showing the
non-controlling interest and retained earnings brought forward either on the face of the
statement or in a separate calculation.

b) Consolidated Statement of Financial Position as at 30 September 2021.

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