IAS $28$ Accounting for associates recommends that associate companies be accounted for using equity accounting when consolidating. While IFRS $3$ recommends that subsidiaries be accounted for using full consolidation

a$)$ Explain how the two methods differ when preparing the group income statement.$(3$ marks$)$

b$)$ Below are the statements of financial position of three entities as at $30$ December $208.$

$\backslash$table$[[,$P$,$S$,$A$],[$Non$-$current assets,,,$],[$Property$,$ plant and equipment,$122,500,65,625,26,250],[$Investments$,87,500,-,-],[,,,],[$Current assets,,,$],[,52,500,26,250,13,125],[,,,],[$Equity$,,,],[$Share capital $($K$1$ ordinary shares$),87,500,8,750,4,375],[$Retained earnings,$65,625,48,125,21,875],[,,,],[$Non$-$current liabilities,$70,000,10,938,4,375],[,,,],[$Current liabilities,,,$],[,,,]]$

$91,875,39,375$

Further information:

$($i$)P$ acquired $75\%$ of the equity share capital of $S$ several years ago, by exchanging $7$ shares in $P$ for every one share in S$.$ At this time the balance on S$\text{'}$s retained earnings was K$26,250.$P has already made the adjustment in the share capital account

$($ii$)P$ acquired $30\%$ of the equity share capital of $A2$ years ago. Paying K$6,563$ in cash the balance on A$\text{'}$s retained earnings was K$13,125$

$($iii$)$ During the year, $P$ sold goods to A for $K8,750$ at a margin of $20\%.$ At the year$-$end, A still held one third of these goods in inventory.

$($iv$)S$ transferred goods to $P$ at a transfer price of $K5,250$ at a mark$-$up of $25\%.$ One quarter of this remained in inventory at the year end.

$($v$)$ At $31$ December $20$X$8,$ it was determined that the investment in A was impaired by K$308.$ while that of S by $5\%$

$($vi$)$ Non$-$controlling interests are valued using the fair value method. The fair value of the noncontrolling interest at the date of acquisition was $K5,600.$

Required:

Prepare Journal entries for notes $($iii$),($IV$)$ and $($V$)$

Prepare the consolidated statement of financial position of the $P$ group as at $31$ December $20$X$8.(18$ mark$)$

B$)$ IFRS $3$ recommends that good will can either be calculated using the fair value method or the proportion of net assets method.

b$)$ Assuming that the $P$ group uses the net asset method to value the non controlling interest re calculate the following using the information in $($b$)$ above;

$(1)$Good Will

$(2)$Non controlling interest and

$(3)$Group retained earnings $(9$ marks$)$