Case Stimulus
Feedme Limited is a company that has been in operations for over two decades producing “Trobomao” a natural cocoa powder beverage, produced from cocoa beans. Five years ago, the company acquired 100% interest in Butane Nigeria Limited a company that specialises in the importation of cocoa beans from Cote d‟ivoire.
In 2016, Feedme Limited acquired 40% interest in a competitor company: Food Co. limited and on January 1, 2019 it acquired 75% interest in Shawama Supermarket Limited.
The draft consolidated financial statements of Feedme Limited group are as follows:
Draft consolidated statement of financial position as at December 31, 2019
Year 2018 2019
N‟000 N‟000 N‟000 N‟000
Assets
Non-current assets:
Freehold buildings at carrying
amount
33,000 31,125
Plant and equipment – (Cost) 21,000 45,000
Accm. depreciation (16,500) (18,000)
4,500 27,000
37,500 58,125
Goodwill -- 1,500
Investment in associates 15,000 16,500
Financial assets 6,150 6,150
58,650 82,275
Current assets:
Inventories 15,000 29,625
Trade receivables 19,125 27,750
Cash and cash equivalents 27,300 67,725
61,425 125,100
120,075 207,375
Equity and liabilities:
Equity
Ordinary share capital at 25k 30,000 59,100
Share premium account 31,425 43,245
Retained earnings 37,500 51,675
Total equity 98,925 154,020
Non-controlling interests -- 1,725
Non-current liabilities:
Lease obligation 2,350 10,650
Loan notes 7,500 21,900
Deferred tax 395 450
10,245 33,000
Current liabilities:
Trade payables 4,200 7,500
Lease obligation 3,000 3,600
Income tax 3,255 6,930
Accrued interest and finance charges 450 600
10,905 18,630
120,075 207,375
Draft consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019
N’000 N’000
Revenue 130,650
Cost of sales (108,375)
Gross profit 22,275
Share of associates profit after tax 5,250
Income from financial assets 3,000
Interest expense (2,250)
Profit before taxation 28,275
Income tax expense (5,865) --
Deferred tax (1,560)
Tax attributable to investment income (675)
(8,100)
Profit for the year attributable to: 20,175
Owner of the parent 18,675
Non-controlling interest 1,500
20,175
Additional information:
i. There had been no acquisition or disposal of freehold buildings during the year.
ii. Information relating to the acquisition of Shawama Supermarket Limited is as follows:
N‟000
Plant and equipment 2,475
Inventories 480
Trade receivables 420
Cash and cash equivalents 1,680
Trade payables (1,020)
Income tax (255)
3,780
Non-controlling interests (945)
2,835
Goodwill 1,500
4,335
2,640,000 shares issued as part consideration 4,125
Balance of consideration paid in cash 210
4,335
iii. Loan notes were issued at a discount in 2019 and the carrying amount of the loan as at December 31, 2019 included N600,000 representing the finance cost attributable to the discount and allocated in respect of the current reporting period.