On 1 April 2001, Machinery Limited bought 80% of the ordinary share capital of Components Limited. On 1 April 2003, Machinery Limited was itself taken over by Sales Limited who purchased 75% of the ordinary shares in Machinery Limited.

The balance sheets of the three companies at 31 October 2005 prepared for internal use showed the following position:

Additional information:

(a) All ordinary shares are 1 each, fully paid.

(b) Preference shares in Components Ltd are 50p each fully paid.

(c) All creditors are payable within one year.

(d) Items purchased by Machinery Ltd from Components Ltd and remaining in inventory at 31 October 2005 amounted to 25,000. The profit element is 20% of selling price for Components Ltd.

(e) Depreciation policy of the group is to provide for:

(i) buildings at the rate of 2% on cost each year;

(ii) plant and equipment at the rate of 10% on cost each year including full provision in the year of acquisition. These policies are applied by all members of the group. Included in the plant and equipment of Components Ltd is a machine purchased from the manufacturers, Machinery Ltd, on 1 January 2004 for 10,000. Machinery Ltd recorded a profit of 2,000 on the sale of the machine.

(f) Intragroup balances are included in accounts receivable and accounts payable respectively and are as follows:

(g) A cheque drawn by Sales Ltd for £11,300 on 28 October 2005 was received by Machinery Ltd on 3 November 2005.
(h) At 1 April 2001, reserves in Machinery Ltd were £28,000 and in Components Ltd £20,000. At 1 April 2003 the figures were £40,000 and £60,000 respectively.

Required:
Prepare a group balance sheet at 31 October 2005 for Sales Ltd and its subsidiaries complying, so far as the information will allow, with the accounting requirements of international accounting standards.

Transcribed Image Text:

Sales Ltd Machinery Ltd Components Ltd E f Non-current assets Freehold land at cost Buildings at cost Less 89,000 30,000 65,000 100,000 120,000 40,000 Accumulated depreciation (36,000) (40,000) (16,400) 64,000 80,000 23,600 Plant and equipment at cost 102,900 170,000 92,000 Less Accumulated depreciation (69,900) (86,000) (48,200) 33,000 84,000 43,800 186,000 194,000 132,400 Investments Shares in Machinery at cost 120,000 Shares in Components at cost 128,000 306,000 322,000 132,400 Current assets Inventory 108,500 75,500 68,400 Account receivable. 196,700 124,800 83,500 Cash at bank 40,200 25,400 345,400 200,300 177,300 Total assets 651,400 522.300 309,700 Current liabilities Accounts payable 240,000 200,700 71,200 Bank overdraft 69,400 Corporation tax 57,400 47,200 24,500 (297,400) (317,300) (95,700) Net assets 354,000 205,000 214,000 Ordinary shares 200,000 120,000 100,000 10% preference shares 40,000 Revenue reserves 154,000 85,000 74,000 354,000 205,000 214,000