On 1 January 2015, Star Ltd acquired 75% of the ordinary shares of Shine Ltd in Hong Kong to form Star-Shine Group(SSG). At that date the balance on the retained earnings of Shine Ltd was Hong Kong Dollars (HK$) 1,700,000. The non-controlling interest in Shine was measured as the proportionate share of the net assets of the subsidiary. No shares have been issued by Shine since acquisition. The summarized income statements and balance sheets of Star Ltd and Shine Ltd as at 31 December 2019 were as follows:

Income Statement for the year ended 31 December 2019
		Star	Shine
		GB£	HK$
Sales		37,422,000	9,504,000
Opening inventories		4,158,000	1,259,280
Purchases		20,790,000	5,346,000
Closing inventories		1,485,000	1,021,680
Cost of sales		23,463,000	5,583,600
Gross profit		13,959,000	3,920,400
Depreciation		2,376,000	712,800
Other expenses		629,640	237,600
Interest paid		415,800	118,800
Total expenses		3,421,440	1,069,200
Profit before tax		10,537,560	2,851,200
Taxation		2,673,000	712,800
Profit after tax		7,864,560	2,138,400

Balance Sheet as on 31 December 2019
		Star	Shine
		GB£	HK$
Non-current assets		8,316,000	5,464,800
Investment in Shine Ltd		267300	-
Current assets:
Inventories		1,485,000	1,021,680
Trade receivables		3,593,700	1,306,800
Shine Ltd		85,950	-
Cash		653,400	47,520
Total current assets		5,818,050	2,376,000
Total Assets		14,401,350	7,840,800
Current liabilities:
Trade payables		3,564,000	1,069,200
Star Ltd			880,988
Taxation		1,188,000	831,600
Total current liabilities		4,752,000	2,781,788
Debentures		2,970,000	950,400
Total assets less liabilities		6,679,350	4,108,612
Capital and reserves
Share capital		2,922,300	359,750
Retained earnings		3,757,050	3,748,862
		6,679,350	4,108,612

The following further information is available:

(i) An amount of HK$ 200,000 was written off goodwill as an impairment charge in the current year and HK$ 140,000in the previous year.

(ii) On 23 March 2019, Star Ltd sold goods £2,250,000 to Shine Ltd, making a profit of 20% on cost. At the year end, one third of these raw materials were still in the inventory of Shine Ltd, and the inter-company transactions have not been eliminated from the financial statements. The goods were recorded by Shine at the exchange rate ruling on 23 March 2019.

(iii) Exchange rates were as follows:

At 1 January 2015GB£ 1=HK$ 15.52

Average for the year ending 31 December 2019GB£ 1= HK$ 10.05

At 31 December 2018/ 1 January 2019GB£ 1= HK$   9.92

At 31 December 2019 GB£ 1=HK$ 10.25

Required:

(a) If the functional currency of Shine Ltd is HK$, which translation method is applicable to translate Shine’s financial statements to GB£ and why?

(b) Showing clearly all your workings:

(i) Calculate the goodwill arising from the acquisition of Shine Ltd in GB£.

(ii) Compute SSG’s retained earnings and non-controlling interest as at 31 December 2019.

(iii) Prepare SSG’s Consolidated Income Statement for the year ended 31 December 2019.

(iv) Prepare SSG’s Consolidated Balance Sheet for the year ended 31 December 2019.