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On 1 January 2022, Poppy Ltd acquired 60% of the equity share capital of Sunflower Ltd for $9.6 million. Below are the summarised draft financial

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On 1 January 2022, Poppy Ltd acquired 60% of the equity share capital of Sunflower Ltd for $9.6 million. Below are the summarised draft financial statements of Poppy Ltd and its subsidiary Sunflower Ltd. Statements of profit or loss for the year ended 30th June 2022: Poppy Ltd Sunflower Ltd S'000 $'000 85,000 42,000 Revenue Cost of sales (63,000) (32,00) Gross profit 22,000 10,000 Distribution costs (2,000) (2,000) Administrative expenses (6,000) (3,200) Finance costs (300) (400) Profit before tax 13,700 4,400 Tax (4.700) (1,400) Profit after tax 2.000 3.000 Statements of financial position as at 30th June 2022: Poppy Ltd Sunflower Ltd $'000 $'000 ASSETS Non-Current assets Property, Plant and Equipment 31,000 12,600 Investment in Sunflower Ltd 9,600 Current Assets Inventories 4.500 2,200 8,000 3,100 Trade receivables Bank 3,500 1,300 16,000 6,600 Total Assets 56,600 19,200 EQUITY AND LIABILITIES Capital and Reserves Ordinary share capital of $1 each 10,000 4,000 Retained earnings 35,400 6,500 45,400 10,500 Non-Current Liabilities 10% loan notes 3,000 4,000 Current Liabilities Trade payables 8,200 4,700 Total equity and liabilities 56,600 19,200 The following information is relevant: 1. At the date of acquisition, the fair values of Sunflower's assets were equal to their carrying values with the exception of an item of equipment, which had a fair value of $2 million in excess of its carrying value. It had a remaining useful life of five years at that date. Straight line depreciation is applied. Sunflower has not adjusted the carrying value of its equipment as a result of the fair value exercise. 2. Sales from Sunflower to Poppy in the post-acquisition period were $8 million. Sunflower made a mark up on cost of 40% on these sales. Poppy had sold $5.2 million (at cost to Poppy) of these goods by 30 June 2022. 3. Sunflower's trade receivables at 30 June 2022 includes $600,000 due from Poppy which did not agree with Poppy's corresponding trade payables. This was due to cash in transit of $200,000 from Poppy to Sunflower. 4. Poppy has a policy of accounting for any non-controlling interest at fair value. The fair value of the non-controlling interest at the acquisition date was $5.9 million. 5. Consolidated goodwill was not impaired at 30 June 2022. 6. Other than were indicated, the statement of profit or loss items are deemed to accrue evenly on a pro-rate basis. Required: a) Prepare the consolidated statement of profit or loss for the Poppy Group for the year ended 30 June 2022. [12 marks] b) Prepare the consolidated statement of financial position for the Poppy Group for the year ended 30 June 2022. [18 marks] Explain why consolidated financial statements are useful to the users of financial statements rather than just the parent company's separate financial statements. [5 marks]

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