Question 3

You work for a large accounting firm KMPG as a Senior Accountant. Your client Paddington plc acquired shares in Winnie plc several years back and you are responsible for the preparation of the year end work.

The following are the Statements of financial position for Paddington plc and Winnie plc as at 31 March 2020, together with the additional information provided below.

		Paddington plc	Winnie plc
Non-Current Assets
Land and buildings		975,000	220,000
Plant and equipment		245,000	75,000
Fixtures and fittings		375,000	54,500
Intangibles: Development costs		30,000
Investment in Winnie plc		350,000
Total Non-Current Assets		1,975,000	349,500
Current Assets
Inventory		625,000	165,000
Trade and other receivables		105,000	76,450
Cash and cash equivalents		65,200	24,500
Total Current Assets		795,200	265,950
Total Assets		2,770,200	615,450

Equity
Ordinary shares (1)		700,000	120,000
Preference shares (1)		300,000	30,000
Retained earnings		1,427,750	335,000
Total Equity		2,427,750	485,000
Current Liabilities
Trade payables		105,000	42,500
Taxation		82,450	33,450
Dividends		95,000	32,000
Total Current Liabilities		282,450	107,950
Non-Current Liabilities
Bank Loan		60,000	22,500
Total Non-Current Liabilities		60,000	22,500
Total Equity and Liabilities		2,770,200	615,450

Notes to the above financial statements:

1. Paddington acquired 84,000 ordinary shares in Winnie on 31 March 2017. They also acquired 15% of the preference shares.

2. At the date of acquisition, the retained earnings of Winnie plc were 205,000.

3. During the year, Paddington sold goods to Winnie for 10,400 which included a mark-up on cost of 30%. At the end of the year, 50% of this stock was still held by Winnie plc.
4. At the date of acquisition, the land and buildings of Winnie plc had a fair value of 50,000 more than their book value. This fair value increase has not been incorporated into the statement of financial position for Winnie plc. Land accounts for 20% of this amount. Winnie acquired the building on 1 April 2012. The group policy is to depreciate buildings over a period of 50 years.

5. Winnie spent 42,000 on developing a new and innovative product. Winnies policy is to expense development costs, however, it is Paddingtons policy to capitalise development costs (i.e. treat it as an asset). The following provides a breakdown of expenditure by Winnie:

Development costs up to 31 March 2017 32,000

Development costs after 31 March 2017 10,000

6. On the 31March 2020, an impairment test was carried out on the goodwill arising from the acquisition of Winnie plc. The report indicated that the goodwill needs to be written down by 10,000.

7. Winnie declared a dividend to its ordinary shareholders on 15 March 2020 which remained unpaid by 31 March 2020. Paddington has not accounted for this income in their financial statements.

YOU ARE REQUIRED TO:

1. Prepare the consolidation schedule for Winnie plc at 31 March 2020.

Calculate the equity and non-controlling interest that will appear in the consolidated statement of financial position for the Paddington Group plc at 31 March 2020.

THATS ALL THE INFO I HAVE FOR THIS QUESTION.