On 1 April 2001, Machinery Limited bought 80 per cent of the ordinary share capital of Components Limited. On 1 April 2003, Machinery Limited was itself taken over by Sales Limited who purchased 75 per cent 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 stock at 31 October 2005 amounted to 25,000. The profit element is 20 per cent of selling price for Components Ltd.

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

(i) buildings - at the rate of 2 per cent on cost each year;

(ii) plant and equipment - at the rate of 10 per cent 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) Intra-group balances are included in debtors and creditors 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 the Companies Acts and UK accounting standards.

Transcribed Image Text:

Sales Ltd Machinery Ltd Components Ltd Fixed assets Freehold land at cost 89,000 30,000 65,000 Buildings at cost 100,000 120,000 40,000 Less 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) 33,000 186,000 84,000 43,800 194,000 132,400