On 1 Januar y 20X0 Walpole Ltd acquired 90% of the ordinar y shares of a French subsidiar y Paris SA.

At that date the balance on the retained ear nings of Paris SA was €10,000. No shares have been issued by Paris since acquisition. The summarised income statements and balance sheet of Walpole Ltd and Paris SA at 31 December 20X2 were as follows:

Income statements for the year ended 31 December 20X2 Walpole Ltd Paris SA

£000 €000 Sales 317,200 200,000 Opening inventories 50,000 22,000 Purchases 180,000 90,000 Closing inventories 60,000 12,000 Cost of sales 170,000 100,000 Gross profit 147,200 100,000 Dividend received from Paris SA 1,800 NIL Depreciation 30,000 30,000 Other expenses 15,000 7,000 Interest paid 6,000 3,000 Total expenses 51,000 40,000 Profit before taxation 98,000 60,000 Taxation 21,000 15,000 Profit after taxation 77,000 45,000 Dividend paid 20,000 10,000 Balance sheet as at 31 December 20X2 £000 000 Non-current assets 94,950 150,000 Investment in Paris SA 41,050 Cur rent assets:
Inventories 60,000 12,000 Trade receivables 59,600 40,000 Paris SA 2,400 Cash 11,000 11,000 Total current assets 133,000 63,000 Cur rent liabilities:
Trade payables 45,000 18,000 Walpole Ltd 12,000 Taxation 21,000 15,000 Total current liabilities 66,000 45,000 Debentures 40,000 10,000 Total assets less liabilities 163,000 158,000 Share capital 80,000 60,000 Share premium 6,000 20,000 Revaluation reser ve 10,000 12,000 Retained ear nings 67,000 66,000 163,000 158,000 The following information is also available:
(i) The revaluation reser ve in Paris SA arose from the revaluation of non-current assets on 1/1/20X2.
(ii) All the non-current assets of Paris were acquired on 1/1/20X0.
(iii) The opening inventor y was acquired when the exchange rate was £1  2.5 and the closing stock when the rate was £1  4.5.
(iv) Exchange rates were as follows:
At 1 January 20X0 £1  €2 Average for the year ending 31 December 20X2 £1  €3 At 31 December 20X1/1 January 20X2 £1  €3.5 At 31 December 20X2 £1  €5 Required:

(a) Assuming that the functional currency of Paris SA is the £ sterling, translate the accounts of the French company into sterling for the consolidated accounts and calculate the profit/loss on changes in the exchange rate for the consolidated accounts at 31 December 20X2.

(b) Prepare the consolidated accounts for the Walpole group at 31 December 20X2.