1. Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2018 and the statement of financial position as at 31 December 2018 for Windmill plc group. NB! It is essential that you show all your workings.

2. Explain why intra-group transactions and balances are eliminated in consolidation. Use the relevant examples from the statements that you have prepared in Requirement 1 to illustrate your explanation.

3. Calculate consolidated basic and diluted EPS. Explain the importance of EPS for the existing and potential shareholders of listed companies and discuss why it is necessary to show also diluted EPS.

Consolidated Financial Statements Windmill ple acquired 60% of Seabass Ltd's equity shares for 300,000 on 1 January 2017. At the date of acquisition Seabass Ltd had retained eamings of 190,000. The two companies' financial statements are presented as follows as at 31 December 2018 (two years after the acquisition): Statements of Financial Position as at 31 December 2018 Windmill ple '000 Seabass Ltd 6000 Assets Non-current assets Property, plant and equipment Investment Seabass Ltd 1.940 300 2.240 500 Current assets Inventories Trade receivables Cash and bank 650 170 1320 3,560 Total assets Equity and liabilities Equity Share capital, 1 Retained earnings Revaluation surplus 2,000 500 20 2,520 Noncurrent liabilities Convertible loan stock 6% Current liabilities Trade payables Tax payable 410 130 540 Total equity and liabilities 3,560 Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018 Windmill ple Seabass Led E000 E000 Sales revenue 5,000 1.000 Cost of sales 2.900 600 Gross profil 2.100 Other expenses 1.700 320 Profit before interest and tax 400 Interest expense Profit before tax Income tax expense 100 Profit for the year Other comprehensive income: Gain on revaluation of property Total comprehensive income for the year 370 Additional information: 1. On 31 December 2018 Windmill plc delivered goods to Seabass Ltd and sent an invoice to Seabass Lid for 100,000. The goods had cost Windmill ple 80,000. Seabass Lid received the goods and the invoice on 2 January 2019 and recorded the transaction then (thus, the transaction is only reflected in Windmill ple's financial statements but not yet in Seabass Lid's statements) 2. It is the group policy to value the non-controlling interest at acquisition at fair value. The fair value of the non-controlling interest in Seabass Lid at the date of acquisition was 80,000. 3. Goodwill has suffered no impairment. 4. Seabass Ltd has issued no shares since the acquisition. 5. Seabass Ltd has not declared or paid any dividends in 2018. 6. Windmill's loan stock is convertible into a total of 500,000 ordinary shares in 2022. 7. Windmill's income tax rate is 25% REQUIRED: 1. Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2018 and the statement of financial position as at 31 December 2018 for Windmill plc group. NB! It is essential that you show all your workings. 2. Explain why intra-group transactions and balances are eliminated in consolidation. Use the relevant examples from the statements that you have prepared in Requirement to illustrate your explanation 3. Calculate consolidated basic and diluted EPS. Explain the importance of EPS for the existing and potential shareholders of listed companies and discuss why it is necessary to show also diluted EPS