E plc acquired 80% of the ordinary share capital of F plc for £180,000 and 50% of the issued 5% cumulative preference shares for £15,000, both purchases being effected on 1 August 2021. The following balances are taken from the books of the two companies at 31 July 2022:

	E plc (£000)	F plc (£000)
Ordinary share capital (£1 shares)	500	200
5% cumulative preference shares (50p shares)	-	30
Share premium account	35	15
General reserve	90	25
Retained profits	80	60
Trade accounts payable	60	30
Taxation	70	40
Depreciation
Freehold property	70	25
Plant and machinery	160	75
Freehold property at cost	120	45
Plant and machinery at cost	380	210
Investment in F plc	180	-
Inventory	150	90
Accounts receivable	60	35
Cash	35	12

The following additional information is available: (a) Inventory of E plc includes goods purchased from F plc for £25,000. F plc charged out these inventory at cost plus 20%. (b) A proposed dividend of £12,000 by F plc includes a full year's preference dividend. No interim dividends were paid during the year by either company. (c) Creditors of E plc include £8,000 payable to F plc in respect of inventory purchases. Debtors of F plc include £15,000 due from E plc. The parent sent a cheque for £6,000 to its subsidiary on 30 July 2022 which was not received by F plc until August 2022. (d) At 1 August 2021 the balances on the reserves of F plc were as follows:

• Share premium: £12,000
• General reserve: £20,000
• Retained profits: £40,000

Required:

1. Prepare a consolidated balance sheet for E plc and its subsidiary F plc at 31 July 2022. Notes to the accounts are not required. Workings must be shown.
2. Discuss the accounting treatment of inter-company transactions in the consolidated financial statements.