On 1 January 2022, Sunny Bright Wears Limited and Made to Last Leather Limited entered into a contractual arrangement to produce leather wears. Sunny Bright Wears Limited has a 40 percent share in its joint operation with Made to Last Leather Limited. The companies invest a combined sum of ₦80,000,000. For the purpose of the joint operation, a separate legal entity, Good Wears Leather Limited, is incorporated. The following balances were extracted from Good Wears and Leather Limited:
₦
Premises 50,000,000
Plant and machinery 20,000,000
Equipment 10,000,000
Revenue 90,000,000
Purchase of materials and labour 35,000,000
Administrative and selling expenses 15,000,000
Trade payables 10,000,000
Additional information:
i. The depreciation is charged on a straight-line basis at 25 percent for Premises, 25 percent for Plant and Machinery, and 20 percent for Equipment.
Required: Using the appropriate method, prepare the statement of profit or loss and the statement of financial position of Sunny Bright Wears Limited, and Made to Last Leather Limited as at 31 December 2022, respectively.
Suggested answer to practice activity 21.8
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