B407F Mid-term revision question

B407F Mid-term revision question - B407F Mid-term revision...

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B407F Mid-term revision You are the financial accountant of Knife Limited (Knife), a listed company in Hong Kong. In Year 1, Knife acquired Fork Limited (Fork) as its subsidiary. The financial statements of the two companies for the year ended 31 December Year 3 were as follows: Statement of Financial Position as at 31 December Year 3: Knife Fork $000 $000 Non-current assets Land 6,000 3,000 Plant and equipment 3,600 1,800 Investment in Fork 5,250 Current assets Inventories 3,300 2,600 Accounts receivable 4,800 1,400 Current account with Knife 300 Cash and cash equivalents 2,850 100 Total assets 25,800 9,200 Share capital @$1 each 14,000 5,000 Retained earnings 3,600 1,300 Total equity 17,600 6 ,300 Non-current liabilities 5,000 - Current liabilities Accounts payable 1,700 1,900 Current Account with Fork 200 Tax payable 1,300 1,0 00 Total liabilities 3,200 2 ,900 Total equity and liabilities 25,800 9,200 Income Statement for the period ended 31 December Year 3: Knife Fork $000 $000 Revenue 2,640 1,640 Cost of sales (1,516) (680) Gross Profit 1,124 960 Dividend Income 70 - Gain on disposal of fixed assets 100 Selling and distribution expenses (342) (47) Administration expenses (320) (30) Finance cost (22) (13) Profit before taxation 510 970 Taxation (126) (70) Profit for the year 384 900 Dividend paid (32) (100) 1
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352 8 00 The following information is provided: (i) Knife acquired 3,500,000 $1 ordinary shares in Fork on 1 January Year 3 for $1.5 cash per share. (ii) At 1 January Year 3, Fork was taking legal action against a third party for breach of contract for $500,000 and where lawyers are confident of winning the case and receiving compensation from the third party. The $1m was not included
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This note was uploaded on 02/24/2012 for the course ACT 407 taught by Professor Mshui during the Fall '11 term at The Open University.

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B407F Mid-term revision question - B407F Mid-term revision...

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