Pudong Limited ("Pudong") is a company listed on the Stock Exchange of Hong Kong. Its main business is the sales of fresh and canned fruits. Pudong had made long-term investments in the following two companies: - Pudong acquired 80% of the issued shares of Stanley Limited ("Stanley") on 1 January 2015 when the share capital and retained profits of Stanley were $1,400,000 and $1,100,000 respectively. - Pudong acquired 25\% of the issued shares of Alora Limited ("Alora") on 1 January 2018. There has been no change in the issued capital of Alora since the acquisition by Pudong. The relevant financial information of the three companies is as follows: Statements of financial position as at 31 December 2018 AL I D40, 11012) Page 2 of 11 Statements of profit and loss for the year ended 31 December 2018 The following information is relevant: (1) At the date of acquisition, the carrying amounts of all identifiable net assets of Stanley were the same as their fair values, except for the following items: Stanley used the historical cost model for its non-current assets. The property, plant and equipment had remaining useful life of five years and is depreciated using straight line method. Depreciation on plant and machinery is regarded as part of cost of sales. No depreciation is provided on land. (2) During 2018, Stanley sold goods at selling price $1,600,000 to Pudong. Stanley invoiced the goods at cost plus 25% mark-up. On 31 December 2018 , the value of unsold goods included in the inventory of Pudong was $600,000. (3) On 1 January 2018, Pudong sold equipment to Stanley at a selling price of $500,000. In the books of Pudong, the cost and accumulated depreciation of the equipment were ACT B407 (1815) Page 3 of 11 $800,000 and $200,000 respectively. At the date of transaction, Stanley estimated the equipment can be used for another four years with no residual value. All transactions related to the sale and depreciation of equipment is included in the administrative expenses. (4) The difference in current account between Pudong and Stanley was caused by cash in transit. (5) During the current financial year, there were sales and purchases of goods between Pudong and Alora. Alora sold goods to Pudong and the selling price and the cost of sales were $600,000 and $480,000 respectively. At year end, the percentage of unsold goods in the books of Pudong was 30%. (6) Pudong has a policy of accounting for non-controlling interest using the fair value method. The fair value of non-controlling interest at the acquisition date was $620,000. An assessment of the impairment loss on goodwill indicated that goodwill has not suffered any impairment loss since the acquisition date. Required: (a) Prepare consolidated journal entries (ignore narratives) to arrive at the (16 marks) opening consolidated financial statements at 1 January 2018 and for the year ended 31 December 2018. (b) Prepare the consolidated statement of financial position for Pudong as at (19 marks) 31 December 2018. Pudong Limited ("Pudong") is a company listed on the Stock Exchange of Hong Kong. Its main business is the sales of fresh and canned fruits. Pudong had made long-term investments in the following two companies: - Pudong acquired 80% of the issued shares of Stanley Limited ("Stanley") on 1 January 2015 when the share capital and retained profits of Stanley were $1,400,000 and $1,100,000 respectively. - Pudong acquired 25\% of the issued shares of Alora Limited ("Alora") on 1 January 2018. There has been no change in the issued capital of Alora since the acquisition by Pudong. The relevant financial information of the three companies is as follows: Statements of financial position as at 31 December 2018 AL I D40, 11012) Page 2 of 11 Statements of profit and loss for the year ended 31 December 2018 The following information is relevant: (1) At the date of acquisition, the carrying amounts of all identifiable net assets of Stanley were the same as their fair values, except for the following items: Stanley used the historical cost model for its non-current assets. The property, plant and equipment had remaining useful life of five years and is depreciated using straight line method. Depreciation on plant and machinery is regarded as part of cost of sales. No depreciation is provided on land. (2) During 2018, Stanley sold goods at selling price $1,600,000 to Pudong. Stanley invoiced the goods at cost plus 25% mark-up. On 31 December 2018 , the value of unsold goods included in the inventory of Pudong was $600,000. (3) On 1 January 2018, Pudong sold equipment to Stanley at a selling price of $500,000. In the books of Pudong, the cost and accumulated depreciation of the equipment were ACT B407 (1815) Page 3 of 11 $800,000 and $200,000 respectively. At the date of transaction, Stanley estimated the equipment can be used for another four years with no residual value. All transactions related to the sale and depreciation of equipment is included in the administrative expenses. (4) The difference in current account between Pudong and Stanley was caused by cash in transit. (5) During the current financial year, there were sales and purchases of goods between Pudong and Alora. Alora sold goods to Pudong and the selling price and the cost of sales were $600,000 and $480,000 respectively. At year end, the percentage of unsold goods in the books of Pudong was 30%. (6) Pudong has a policy of accounting for non-controlling interest using the fair value method. The fair value of non-controlling interest at the acquisition date was $620,000. An assessment of the impairment loss on goodwill indicated that goodwill has not suffered any impairment loss since the acquisition date. Required: (a) Prepare consolidated journal entries (ignore narratives) to arrive at the (16 marks) opening consolidated financial statements at 1 January 2018 and for the year ended 31 December 2018. (b) Prepare the consolidated statement of financial position for Pudong as at (19 marks) 31 December 2018