Exercise 1 On 31 December 2016, Simone Ltd, acquired 150,000 $1 ordinary shares in Peres Pte. Ltd.. for a consideration of $300,000. The consideration was settled by Peres Pte. Ltd.'s shareholders accepting 100,000, $1 ordinary shares in PeresPte. Ltd. valued at $3.00 each. On the same day, Simone Ltd bought 20,000 8% preference shares in Peres pte. Ltd. for a cash consideration of $30,000. The statements of financial position of Simone Ltd. and Peres Pte. Ltd. at 31 December 2018 were as follows: Simone Ltd Peres Pte. Ltd. $ $ $ $ Pro[erty, plant and Equipment Freehold land, at cost 372,500 198,950 Plant, at net book value 501,500 113,400 Machinery and equipment 120,000 150,000 Patents and trademarks 40,000 20,000 Investments in Peres Pte. Ltd.: 150,000 ordinary shares 300,000 20,000 preference shares 30,000 Loans to Peres Pte. Ltd. 59,000 Current assets: Inventories 130,000 62,650 Trade receivables 88,000 30,000 Other receivables 37,500 5,000 Bank 10,000 265,500 6,000 103,650 1,688,500 586,000 Ordinary shares of $1 each 800,000 200,000 8% preference shares of $1 each - 100,000 Share premium account 300,000 10,000 General reserves 50,000 12,000 Retained profits 284,000 38,400 Shareholders' funds 1,434,000 360,400 Loan from Simone Ltd. - 59,000 Current liabilities: Trade payables 98,500 52,600 Other payables 80,000 50,000 Taxation 76,000 254,500 64,000 166,600 1,688,500 586,000 The followings are the relevant information: a)On 31 December 2016, Peres Pte Ltd. had $8,000 and $20,000 in the general reserves and retained profits respectively. The share premium account of $10,000 arose prior to 31 December 2016. b)The freehold land of Peres Pte. Ltd.. had a fair value of $100,000 in excess of its book value at 31 December 2016. No adjustment had been made in the accounts of Peres Pte Ltd. for this fair value. c)On 31 December 2016, the inventories of Peres Pte. Ltd. were assessed to be over-valued by $20,000. These inventories at acquisition date were fully realized in 2017 and 2018. d)On 31 December 2016, Simone Ltd. revalued Peres Pte. Ltd.'s plant at $164,000, at which time its written down book value was $140,000. Peres Pte. Ltd.'s account was not adjusted to give effect to the revaluation. There were neither plant additions nor disposals by Peres Pte. Ltd.. in 2017 or 2018. Depreciation on plant was calculated at the rate of 10% per annum on the reducing balance method. e)The preference shares of Peres Pte. Ltd.. were classified and presented as equity. The preference dividends of 2018 were paid by Peres Pte. Ltd. on 31 December 2018. To show: The consolidated statement of financial position of Simone Ltd. as at 31 December 2018.