On 1 July 2004, Pod Limited purchased 225,000 1 fully paid ordinary shares of Pea Limited for a consideration of 500,000. Pea Limited's share capital and share premium were each the same at both dates. Simplified balance sheets for both companies as at 30 June 2005 are set out below.

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Balance sheets as at 30 June 2005 Pod Limited Pea Limited Non-current assets Property, plant and equipment Investments Shares in Pea Limited 1,104,570 500,000 982,769 Current assets Stocks 672,471 294,713 Debtors 216,811 164,517 Amounts due from subsidiary company 76,000 Cash 2,412 967,694 1,361 460,591 Current liabilities Creditors (184,719) (137,927) Amounts owing to holding company (76,000) Overdraft (68,429) (25,681) (253,148) (239,608) Net current assets 714,546 220,983 Non-current liabilities Bank loan (800,000) (750,000) 1,519,116 453,752