Ham plc acquired 100% of the common shares of Burg plc on 1 Januar y 20X0 and gained control. At that date the balance sheets of the two companies were as follows:

Notes:
1. The fair value is the same as the book value.
2. £15,000 of the negative goodwill arises because the net assets have been acquired at below their fair value and the remainder covers expected losses of £3,000 in the year ended 31/12/20X0 and £2,000 in the following year.
Required:

(a) Prepare a consolidated balance sheet for Ham plc as at 1 January 20X0.

(b) Explain how the negative goodwill will be treated.

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Ham Burg 000 000 ASSETS Non-current assets Property, plant and equipment 250 100 Investment in Burg 90 Current assets 100 Total assets 440 70 170 EQUITY AND LIABILITIES Capital and reserves l shares 200 100 Retained earnings 160 360 110 Current liabilities 80 10 60 Total equity and liabilities 440 170