The financial statements of three companies are as follows: Statement of financial position Ocean Sea Lake GHS’000 GHS’000 GHS’000 Investment in Sea (90%) 800 Investment in Lake (40%) 500 Investment in Lake (30%) 800 Assets 700 250 800 2,000 1,050 800 Share capital (GHS1) 500 200 80 Share premium 500 Nil 60 Retained earnings 850 400 510 Equity 1,850 600 650 Liabilities 150 450 150 2,000 1,050 800 Statements of profit or loss Ocean Sea Lake GHS’000 GHS’000 GHS’000 Revenue 3,150 2,000 2,500 Operating costs (2,300) (1,820) (2,000) Operating profit 850 180 500 Tax (350) (80) (250) Profit for the year 500 100 250 Additional information Ocean made its investment in Sea three years ago when the retained earnings of Sea were GHS200,000, the fair value of the NCI was GHS50,000 and the fair value of the net assets GHS500,000. The fair value adjustment relates to the non-depreciable asset of land. Ocean made its investment in Lake two years ago when the retained earnings of Lake were GHS100,000. The initial investment gave Ocean significant influence over the financial and operating policies of Lake. At that date the carrying value of the net assets were not materially different from their fair value. Sea made its investment in Lake six months ago. At that date the book value of the net assets were not materially different from their fair value. At that date the fair value of the Ocean’s investment in Lake was GHS700,000 and the fair value of the effective NCI in Lake was GHS700,000. Ocean has a policy always to calculate goodwill in full on the acquisition of a subsidiary. The impairment reviews reveal no impairment losses are to be recorded. No dividends have been paid in the current year. No group company has issued any shares in the last three years. Profits are assumed to accrue evenly. Required: Prepare the consolidated statement of financial position and the consolidated statement of profit or loss of Ocean.

The financial statements of three companies are as follows: Statement of financial position Ocean Sea Lake GHS’000 GHS’000 GHS’000 Investment in Sea (90%) 800 Investment in Lake (40%) 500 Investment in Lake (30%) 800 Assets 700 250 800 2,000 1,050 800 Share capital (GHS1) 500 200 80 Share premium 500 Nil 60 Retained earnings 850 400 510 Equity 1,850 600 650 Liabilities 150 450 150 2,000 1,050 800 Statements of profit or loss Ocean Sea Lake GHS’000 GHS’000 GHS’000 Revenue 3,150 2,000 2,500 Operating costs (2,300) (1,820) (2,000) Operating profit 850 180 500 Tax (350) (80) (250) Profit for the year 500 100 250 Additional information Ocean made its investment in Sea three years ago when the retained earnings of Sea were GHS200,000, the fair value of the NCI was GHS50,000 and the fair value of the net assets GHS500,000. The fair value adjustment relates to the non-depreciable asset of land. Ocean made its investment in Lake two years ago when the retained earnings of Lake were GHS100,000. The initial investment gave Ocean significant influence over the financial and operating policies of Lake. At that date the carrying value of the net assets were not materially different from their fair value. Sea made its investment in Lake six months ago. At that date the book value of the net assets were not materially different from their fair value. At that date the fair value of the Ocean’s investment in Lake was GHS700,000 and the fair value of the effective NCI in Lake was GHS700,000. Ocean has a policy always to calculate goodwill in full on the acquisition of a subsidiary. The impairment reviews reveal no impairment losses are to be recorded. No dividends have been paid in the current year. No group company has issued any shares in the last three years. Profits are assumed to accrue evenly. Required: Prepare the consolidated statement of financial position and the consolidated statement of profit or loss of Ocean.

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 4AP

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Question

The financial statements of three companies are as follows:

Statement of financial position	Ocean	Sea	Lake
GHS’000		GHS’000	GHS’000
Investment in Sea (90%)	800
Investment in Lake (40%)	500
Investment in Lake (30%)		800
Assets	700	250	800
	2,000	1,050	800
Share capital (GHS1)	500	200	80
Share premium	500	Nil	60
Retained earnings	850	400	510
Equity	1,850	600	650
Liabilities	150	450	150
	2,000	1,050	800

Statements of profit or loss	Ocean	Sea	Lake
	GHS’000	GHS’000	GHS’000
Revenue	3,150	2,000	2,500
Operating costs	(2,300)	(1,820)	(2,000)
Operating profit	850	180	500
Tax	(350)	(80)	(250)
Profit for the year	500	100	250

Additional information

Ocean made its investment in Sea three years ago when the retained earnings of Sea were GHS200,000, the fair value of the NCI was GHS50,000 and the fair value of the net assets GHS500,000. The fair value adjustment relates to the non-depreciable asset of land.
Ocean made its investment in Lake two years ago when the retained earnings of Lake were GHS100,000. The initial investment gave Ocean significant influence over the financial and operating policies of Lake. At that date the carrying value of the net assets were not materially different from their fair value.
Sea made its investment in Lake six months ago. At that date the book value of the net assets were not materially different from their fair value. At that date the fair value of the Ocean’s investment in Lake was GHS700,000 and the fair value of the effective NCI in Lake was GHS700,000.
Ocean has a policy always to calculate goodwill in full on the acquisition of a subsidiary. The impairment reviews reveal no impairment losses are to be recorded. No dividends have been paid in the current year. No group company has issued any shares in the last three years. Profits are assumed to accrue evenly.

Required:

Prepare the consolidated statement of financial position and the consolidated statement of profit or loss of Ocean.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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