Ican 2022 Corporate Reporting Question 2

Heritage Limited and Legacy Limited are two competitors in merchandising and retailing sector of the economy. At a time when the sector is faced with escalating fuel prices and economic recession, both companies have shown resilience and adaptability. The financial statements of the companies for the year ended December 31, 2020 are as follows: Statements of profit or loss for the year ended December 31, 2020: Heritage Limited Legacy Limited N’000 ₦’000 Revenue 150,000 700,000 Cost of sales (60,000) (210,000) Gross profit 90,000 490,000 Interest 500 12,000 Distribution costs 13,000 72,000 Administrative expenses 15,000 35,000 Total expenses 28,500 119,000 Profit before tax 61,500 371,000 Income tax expense (16,605) (100,170) Profit for the year 44,895 270,830 The statements of financial position as at December 31, 2020: Heritage Limited Legacy Limited N’000 N’000 Assets: Non-current assets: Property 0 500,000 Plant and equipment 190,000 280,000 190,000 780,000 Current assets: Inventories 12,000 26,250 Trade receivables 37,500 105,000 Bank 500 22,000 50,000 153,250 Total assets: 240,000 933,250 Equity and liabilities: Equity: Share capital 156,000 174,750 Retained earnings 51,395 390,830 207,395 565,580 Non-current liabilities: Long-term debt 10,000 250,000 Current liabilities: Trade payables 22,605 117,670 Total liabilities 32,605 367,670 Total equity and liabilities 240,000 933,250 The Board of Directors of Patrimony Investments PLC is considering a proposal to buy into one of the companies in order to enhance the reported profit and stability of the company after the investment.