Question 1 (35 marks) The following are the summarised statements of financial position for Meadow plc and Crown Ltd at 30 April 2019, the end of their most recent accounting periods.

Statements of financial position at 30 April 2019 Meadow plc Crown Ltd Non-current assets 000 000 Property, plant and equipment 2,800 1,250 Investment - 160,000 ordinary shares in Crown Ltd 795 - 150,000 1 4% debentures in Crown Ltd 150 Current assets Inventory 89 64 Receivables 162 87 Owed by Meadow plc 0 42 Cash and cash equivalents 67 30 totoal 4,063 1,473 Equity and reserves Ordinary 1 shares 1,000 200 Share premium 1,600 500 Retained earnings 1,089 330 Non-current liabilities 1 4% debentures 250 375 Current liabilities Payables 104 68 Owed to Crown Ltd 20 0 total 4,063 1,473

The following information is also available: 1) On 1 May 2018 Meadow plc acquired share capital in Crown Ltd. At that date the retained earnings of Crown Ltd amounted to 180,000. Each ordinary share in Crown Ltd carries one vote and there are no voting rights other than those attached to the ordinary shares. Crown Ltd has not issued any ordinary shares since this date. 2) On 1 May 2018 the fair value of Crown Ltds property, plant and equipment was 50,000 higher than book value. This is not reflected in the statement of financial position above. Crown Ltd has not re-valued any non-current assets since this date. No adjustment is necessary for depreciation charged during the year ended 30 April 2019.

Continued 3) During the year ended 30 April 2019 Crown Ltd sold goods to Meadow plc for 61,000. These had originally cost 36,000. At 30 April 2019 Meadow plc still had 40% of these goods in closing inventory. 4) Meadow plcs financial statements show 20,000 owed to Crown Ltd; Crown Ltds financial statements show 42,000 owed by Meadow plc. The difference is explained by cash in transit. 5) A review at 30 April 2019 established impairment of goodwill amounting to 21,000. 6) The fair value of the non-controlling interest at acquisition was 191,000 Requirement for question 1 a) Calculate goodwill arising on the acquisition of Crown Ltd at 1 May 2018 using: (i) The partial goodwill method (ii) The full goodwill method 6 marks b) Explain with reasons whether it is possible at some future date for Meadow plc to revalue upwards the goodwill calculated in part a). 3 marks c) Prepare with full supportive workings a consolidated statement of financial position for Meadow plc at 30 April 2019. You may assume that Meadow plc uses the partial goodwill method when preparing consolidated financial statements. 15 marks d) During the year ended 30 April 2019 Meadow plc sold a motor vehicle to Crown Ltd for 30,000. The vehicle was acquired by Meadow plc on 1 May 2015 at a cost of 45,000 and depreciated on a straight-line basis over 5 years. Explain with supporting calculations how this will impact on the consolidated statement of financial position at 30 April 2019. (Note that you do not need to re-produce the entire consolidated statement of financial position) 4 marks e) Explain with supporting calculations, how the accounting treatment would differ if Meadow plc had instead paid 725,000 to acquire its investment in Crown Ltd. 3 marks f) With reference to Meadow plc and Crown Ltd explain the following terms outlined in IFRS 10 Consolidated Financial Statements: Subsidiary Non-controlling interest Purchased goodwill 4 marks Note: You should round all numbers to the nearest 000 Total 35 marks Continued