consolidation

QUESTION ONE SECTION A: THIS SECTION IS COMPULSORY AND MUST BE ATTEMPTED (a) Barcelona acquired 60% of Madrid's ordinary share capital on 1 October 2002 at a price of K1.06 per share. The balance on Madrid's retained earnings at that date was K104m Their respective statements of financial position as at 30 September 2006 are as follows: and general reserve stood at K11 m. Barcelona K' million Madrid K' million Non-current assets Property, plant and equipment Patents 354 2,848 45 Investment in Madrid 159 Current assets 3.052 Inventories 895 Trade and other receivables Cash and cash equivalents 1,348 212 2.455 5.507 Equity Share capital (20n ordinary shares) 920 Retained earnings 2,086 394 General reserve 775 46 3.781 490 Non-current liabilities Long term borrowings 558 168 Current liabilities Net Piss Trade and other payables 1,168 183 Current portion of long term borrowings 23 1.168 206 5.507 864 At the date of acquisition the fair values of some of Madrid's assets were greater than their carrying amounts. One line of Madrid's inventory had a fair value of K8 million above its carrying amount. This inventory had all been sold by 30 September 2006. Madrid's land and buildings had a fair value K26m above their carrying amount. K20m of this is attributable to the buildings, which had a remaining useful life of 10 years at the date of acquisition. It is group policy to value non-controlling interest at fair value. The fair value of the non- controlling interest at acquisition was K86m. Annual impairment tests have revealed cumulative impairment losses relating to recognised goodwill of K20m to date. Required Produce the consolidated statement of financial position for the Barcelona Group as at 30 September 2006. (15 Marks) 354 225 251 34 510 864 50%