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Pepper bought 70% of Salt on 1 July 2016

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Pepper bought 70% of Salt on 1 July 2016. The following are the statements of profit or loss of Pepper and Salt for the year ended 31 March 2017.
Pepper Salt
GHS’000 GHS’000
Revenue 31,200 10,400
Cost of sales (17,800) (5,600)
Gross profit 13,400 4,800
Operating expenses (8,500) (3,200)
Profit from operations 4,900 1,600
Investment income 2,000
Profit before tax 6,900 1,600
Tax (2,100) (500)
Profit for the year 4,800 1,100
The following information is available:
1. On 1 July 2016, an item of plant in the books of Salt had a fair value of GHS5,000,000 in excess of its carrying amount. At this time, the plant had a remaining life of 10 years. Depreciation is charged to cost of sales.
2. During the post-acquisition period Salt sold goods to Pepper for GHS4,400,000. Of this amount, GHS500,000 was included in the inventory of Pepper at the year-end. Salt earns a 35% margin on its sales.
3. Goodwill amounting to GHS800,000 arose on the acquisition of Salt, which had been measured using the fair value method. Goodwill is to be impaired by 10% at the year-end. Impairment losses should be charged to operating expenses.
4. Salt paid a dividend of GHS500,000 on 1 January 2017.
Required:
Prepare the consolidated statement of profit or loss for the year ended 31 March 2017.


Question 11
P Ltd acquired 70% of S Ltd three years ago, when S Ltd.’s retained earnings were GHS430,000.
The financial statements of each company for the year ended 31 March 2017 are as follows:
Statements of financial position as at 31 March 2017
P Ltd S Ltd
GHS’000 GHS’000
Non-current assets
Property, plant and equipment 900 400
Investment in S Ltd 700
Current assets 300    600
1,900 1,000
Share capital (GHS1)    200    150
Other components of equity      50
Retained earnings 1,350 700
1,600 850
Non-current liabilities    100     90
Current liabilities    200     60
1,900 1,000
Statements of profit or loss for the year ended 31 March 2017
P Ltd S Ltd
GHS’000 GHS’000
Revenue 1,000 260
Cost of sales (750) (80)
Gross profit 250 180
Operating expenses (60) (35)
Profit from operations 190 145
Finance costs (25) (15)
Investment income 20      
Profit before tax 180 130
Tax (100) (30)
Profit for the year 85 100
You are provided with the following additional information:
1. S Ltd had plant in its statement of financial position at the date of acquisition with a carrying amount of GHS100,000 but a fair value of GHS120,000. The plant had a remaining life of 10 years at acquisition. Depreciation is charged to cost of sales.
2. The P Ltd group values the non-controlling interests at fair value. The fair value of the non-controlling interests at the date of acquisition was GHS250,000. Goodwill has been impaired by a total of 30% of its value at the reporting date, of which one-third related to the current year.
3. At the start of the year P Ltd transferred a machine to S Ltd for GHS15,000. The asset had a remaining useful economic life of 3 years at the date of transfer. It had a carrying amount of GHS12,000 in the books of P Ltd at the date of transfer.
4. During the year S Ltd sold some goods to P Ltd for GHS60,000at a mark-up of 20%. 40% of the goods remained unsold at the year-end. At the year-end, S Ltd’s books showed a receivables balance of GHS6,000 as being due from P Ltd. This disagreed with the payables balance of GHS1,000 in P Ltd’s books due to P Ltd having sent a cheque to S Ltd shortly before the year end which S Ltd had not yet received.
5. S Ltd paid a dividend of GHS20,000 on 1 March 2017.
Required:
Prepare the consolidated statement of financial position and consolidated statement of profit or loss for the year ended 31 March 2017.