Posted in Ayr plc acquired holdings in two companies as follows:
|
Brodick Ltd |
– |
80% of the ordinary share capital purchased on 1 December 1999 for £5 million. |
|
5 |
– |
20% of the preference share capital purchased on 1 June 2001 for £500 000. |
|
Carluke Ltd |
– |
30% of the ordinary share capital purchased on 1 April 2001 for £1.5 million. |
The draft profit and loss accounts of the companies for the year ended 30 November 2001 were:
|
Ayr |
Brodick |
Carluke |
|
|
plc |
Ltd |
Ltd |
|
|
£000 |
£000 |
£000 |
|
|
Turnover |
4000 |
2000 |
1500 |
|
Cost of sales |
(2800) |
(1400) |
(1050) |
|
1200 |
600 |
450 |
|
|
Distribution costs |
(200) |
(100) |
(50) |
|
Administrative expenses |
(400) |
(250) |
(100) |
|
600 |
250 |
300 |
|
|
Taxation |
(180) |
(80) |
(90) |
|
Profit after taxation |
420 |
170 |
210 |
|
Dividends – preference |
(40) |
(50) |
– |
|
– ordinary |
(200) |
(70) |
(100) |
|
180 |
50 |
110 |
Additional information
(1) The reserves of Brodick Ltd and Carluke Ltd were:
|
Date |
Revaluation reserve |
Profit and loss |
|
|
£000 |
£000 |
||
|
Brodick Ltd |
1 December 1999 |
400 |
300 |
|
1 June 2001 |
500 |
200 |
|
|
Carluke Ltd |
1 April 2001 |
– |
70 |
The ordinary dividends of Carluke Ltd all relate to the post-acquisition period.
(2) There have been no changes in the companies’ share capitals since acquisition. These
are:
|
Brodick Ltd |
Carluke Ltd |
|
|
£000 |
£000 |
|
|
Ordinary shares of £1 each |
5000 |
3000 |
|
Preference shares of £1 each |
2000 |
– |
The preference dividends of Brodick Ltd were paid in two equal instalments on 31 May 2001, and 30 November 2001.
(3) On 1 December 1999, the value of the tangible fixed assets of Brodick Ltd was £200 000 higher than their net book value. This was due to the land element of freehold property.
(4) On 30 June 2001, Carluke Ltd sold £200 000 of goods to Ayr plc. Carluke Ltd operates a standard mark up of 25% on all sales. On 30 November 2001, Ayr Ltd still had 75% of these goods in stock.
(5) It is group policy to amortise goodwill over ten years with a full year’s charge in the year of acquisition.
(6) Ayr plc has not yet accounted for any dividends receivable.
Requirements
(a) Calculate the following amounts as they would appear in the consolidated profit and loss account of Ayr plc for the year ended 30 November 2001:
(i) Income from investment in associated undertakings
(ii) Minority interests
(iii) Profit after taxation.
Note: Make all calculations to the nearest £000.
(b) Explain the rationale for the accounting treatment in (a) (i) and (ii) above.
