B407F_Final_Revision-1(student)

B407F_Final_Revision-1(student) - 1 B407F Advanced...

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Unformatted text preview: 1 B407F Advanced Financial Reporting and Analysis I Final Revision You are the financial accountant of Ocean Limited (Ocean), a listed company in Hong Kong, involved in textiles, manufacturing and retailing. Two years ago, Ocean acquired 80% equity shares in Sea Limited (Sea) at a price of $3,000,000. The retained profits of Sea at that date were $1,000,000. On 1 April 2007, Ocean also acquired River Limited (River) 30% interest for $1,250,000. The income statements for the year ended 31 March 2008 and the statement of financial position for Ocean and Sea at 31 March 2008 were as follows: Statement of financial position as at 31 March 2008: Ocean Sea River $000 $000 $000 Non-current assets Buildings 25,450 8,500 6,900 Plant and equipment 15,000 2,900 - Investment in Sea Limited 3,000 - - Investment in River Limited 1,250 - - 44,700 11,400 6,900 Current assets Inventories 1,040 1,200 3,480 Current account Sea 800 Current account - River 360 Accounts Receivable 1,700 2,400 1,300 Bank 1,000 1,600 - 4,900 5,200 4,780 Total assets 49,600 16,600 11,680 Share capital @$1 each 27,600 2,000 4,800 Retained earnings 7,400 1,900 3,180 Total equity 35,000 3,900 7,980 Non-current liabilities 12,000 7,900 - Current liabilities Accounts payable 1,200 2,380 2,740 Current account Ocean 620 360 Tax payable 1,400 1,800 600 Total liabilities 2,600 4,800 3,700 Total equity and liabilities 49,600 16,600 11,680 2 Income statement for the year ended 31 March 2008: Ocean Sea River $000 $000 $000 Revenue 35,000 18,000 4,800 Cost of sales (19,800) (10,000) (2,400) Gross profit 15,200 8,000 2,400 Dividend income 160 - - Profit on sale of non-current assets 400 - - Selling and distribution expenses (9,800) (3,400) (700) Administrative expenses (2,780) (3,300) (450) Finance costs (200) (100) (50) Profit before taxation 2,980 1,200 1,200 Taxation (1,280) (700) (560) Profit for the year 1,700 500 640 Statement of changes in retained earnings Ocean Sea River $000 $000 Profit for the year 1,700 500 640 Dividend paid (1,000) (200) - Retained earnings for the year 700 300 640 Retained earnings b/f 6,700 1,600 2,540 Retained earnings c/f 7,400 1,900 3,180 The following information is provided: (1) During the year ended 31 March 2008, Sea sold goods to Ocean, which are included in the income statement of Ocean and Sea at $300,000. At 31 March 2008, 50% of these goods were still in inventory. Sea priced its sales at cost plus 50%. (2) On 10 May, 2007, Ocean sold a piece of equipment to Sea for $900,000. The carrying value included in Seas statement of financial position was $500,000. The groups depreciation policy is to provide for depreciation on plant and equipment at the rate of 20% on cost each year, including a full year provision in the year of acquisition....
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B407F_Final_Revision-1(student) - 1 B407F Advanced...

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