Q1 plc acquired 70% of the ordinary share capital of R1 plc for £240,000 and 50% of the issued 5% cumulative preference shares for £18,000, both purchases being effected on 1 March 2023. The following balances are taken from the books of the two companies at 29 February 2024:

• Ordinary share capital (£1 shares):
  • Q1 plc: £600,000
  • R1 plc: £250,000
• 5% cumulative preference shares (50p shares):
  • Q1 plc: £0
  • R1 plc: £40,000
• Share premium account:
  • Q1 plc: £50,000
  • R1 plc: £30,000
• General reserve:
  • Q1 plc: £120,000
  • R1 plc: £40,000
• Retained profits:
  • Q1 plc: £110,000
  • R1 plc: £80,000
• Trade accounts payable:
  • Q1 plc: £90,000
  • R1 plc: £50,000
• Taxation:
  • Q1 plc: £100,000
  • R1 plc: £60,000
• Depreciation:
  • Freehold property:
    • Q1 plc: £60,000
    • R1 plc: £30,000
  • Plant and machinery:
    • Q1 plc: £180,000
    • R1 plc: £90,000
• Freehold property at cost:
  • Q1 plc: £150,000
  • R1 plc: £60,000
• Plant and machinery at cost:
  • Q1 plc: £400,000
  • R1 plc: £250,000
• Investment in R1 plc:
  • Q1 plc: £240,000
  • R1 plc: £0
• Inventory:
  • Q1 plc: £200,000
  • R1 plc: £120,000
• Accounts receivable:
  • Q1 plc: £70,000
  • R1 plc: £35,000
• Cash:
  • Q1 plc: £40,000
  • R1 plc: £15,000

The following additional information is available: (a) Inventory of Q1 plc includes goods purchased from R1 plc for £30,000. R1 plc charged out these inventory at cost plus 25%. (b) A proposed dividend of £15,000 by R1 plc includes a full year's preference dividend. No interim dividends were paid during the year by either company. (c) Creditors of Q1 plc include £7,000 payable to R1 plc in respect of inventory purchases. Debtors of R1 plc include £12,000 due from Q1 plc. The parent sent a cheque for £5,000 to its subsidiary on 28 February 2024 which was not received by R1 plc until March 2024. (d) At 1 March 2023 the balances on the reserves of R1 plc were as follows:

• Share premium: £15,000
• General reserve: £25,000
• Retained profits: £45,000

Required:

1. Prepare a consolidated balance sheet for Q1 plc and its subsidiary R1 plc at 29 February 2024. Notes to the accounts are not required. Workings must be shown.
2. Explain the accounting treatment of 'cost of control' in the consolidated financial statements.