I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 

 

446

 

This last point may be clearer if we construct the working for group retained earnings. 

 

Group retained earnings 

 

 

 

 P Co 

 S Co 

 

 $ 

 $ 

 Per 

question 

 108,000 

25,000 

 

Pre-acquisition retained earnings 

             – 

 

   25,000 

 

Group share of post-acq'n retained earnings: 

  

S Co (75%  25,000) 

 

  18,750 

  

 

Group retained earnings 

 

126,750 

 

Notice that a consolidated statement of profit or loss links up with a consolidated statement of financial 

position exactly as in the case of an individual company's accounts. Now try the following question. 

QUESTION 

Consolidated statement of profit or loss

 

The following information relates to the Wheeler group for the year to 30 April 20X7. 

 

Wheeler Co 

Brookes Co 

 

 

$'000 

 

$'000 

Revenue 

 

1,100 

 

500 

Cost of sales 

 

630 

 

300 

Gross profit 

 

470 

 

200 

Administrative expenses 

 

105 

 

150 

Profit before tax 

 

365 

 

50 

Income taxes 

 

  65 

  10 

Profit for the year 

 

300 

  40 

Note.  

 

 

Retained earnings brought forward 

 

460 

 

106 

Retained earnings carried forward 

  

760 

 

146 

Additional information 

(a) 

The issued share capital of the group was as follows. 

Wheeler Co: 5,000,000 ordinary shares of $1 each 

Brookes Co: 1,000,000 ordinary shares of $1 each 

(b) 

Wheeler Co purchased 80% of the issued share capital of Brookes Co in 20X0. At that time, the 

retained earnings of Brookes amounted to $56,000. 

Required 

Prepare the consolidated statement of profit or loss and the movement on retained earnings for the 

Wheeler group for the year to 30 April 20X7. 

BPP Tutor Toolkit Copy

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CHAPTER 25  

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  THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS