Fresh Ltd acquired 80 per cent of Stale Ltd on 1 January 20X9, when the balance on Fresh Ltd’s retained earnings was £160,000 and the balance on Stale Ltd’s retained earnings was £100,000. There have been no share issues since this date by either company. Both companies adopt a policy of not paying any dividends.

Additional information
At the end of the year, the directors conduct an impairment review and conclude that the value of goodwill is now £20,000.

Required
a. Calculate the goodwill on consolidation (all workings must be shown).
b. Prepare the consolidated statement of financial position as at 31 December 20X9.

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Summary statement of financial position for both companies as at 31 December 20X9 Fresh Ltd ASSETS Sundry net assets Investment in Stale Total assets EQUITY Equity share capital Share premium Retained earnings Total equity £ 144,000 200,000 344,000 80,000 70,000 194,000 344,000 Stale Ltd £ 220,000 220,000 80,000 20,000 120,000 220,000