Question

The condensed Statement of Financial Position and Income Statements of Love Co. Ltd and its overseas...

The condensed Statement of Financial Position and Income Statements of Love Co. Ltd and its overseas (foreign subsidiary Stress Co. Ltd. are shown below:


STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017

   Love Co Ltd.   Stress Co. Ltd
ASSETS $ $ £ £
Non Current Assets:
Equipment at Cost
800 500
Less: accumulated depreciation
(350)
450
(200) 300
Investment in Scoochie’s
100 share @ £1 each

200

_____

0

____

650 300
Current Assets:
Inventories 800 500
Accounts Receivable

1000

_____

1800

_____

350

____

850

_____

Total Assets 2,450 1,150
EQUITY & LIABILITIES:
Equity:
Ordinary Shares $1/£1 1,000 500
Retained earnings

850

_____

1850

350

_____

850

Long-Term Loans 200 200
Current Liabilities

400

_____

2450

100

_____

1150


Condensed income statement of Love Co. and its overseas subsidiary Stress Co. for the year ended December 2017.

Profit before tax $800
£300
Tax (450) (175)
Profit after Tax Retained $350 £125

The following additional information is given:

a) Depreciation is charged at a rate of 5% per annum


b) There were no loan repayments or movements in non-current assets during the year ended December 31, 2017. The opening inventory for Stress Co. was £100. Assume that inventory turnover times are very short.


c) Love Co. has had its interest in Stress Co. since the incorporation of the company.


d) The following exchange rates are applicable:
• £6 = $1 when Stress Co. was Incorporated
• £4 = $1 when Stress Co. acquired its non-current assets
• £3.5 = $1 on December 31, 2016
• £2.5 = $1 – average rate of exchange for the year ended December 31,2014

£1 = $1 on December 31, 2017
Required:
Prepare the summarized consolidated financial statements of the Love Co. group for the year ended December 31, 2017.

Homework Answers

Answer #1

Income Statement - Love Company & Stress Company - Consolidated Statement

Consolidated Income Statement

Love Stress
Profit before tax $800 £300/2.5 = $120
Tax (450)

175/2.5 = 70

Profit after Tax Retained $350 £125/2.5 = 50

Consolidated Balance Sheet

Love Sress Consolidated
Current Assets:

Inventories

800 500/1= $500 $1300
Account Receivables 1000 350/1 = $350 $1350
Total Current Assets $1800 $850 $2650
Love Stress Consolidated
Non - Current Assets
Equipment at Cost 800 500/4 = $125 $925
Less: accumulated depreciation 350 200/4 = $50 $400
Investment in Scoochie’s
100 share @ £1 each
200 _ _
Non Current Liabilities
Long-Term Loans 200 200/1 = 200 $400
Equity
Ordinary Shares $1/£1 1,000 $1000

Retained earnings

Accumulated Other Comprehensive   

Current Liabilities

850

400

100

$850

$425

$500

P
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