Question # 4. (4+6) On 1 April 2011 Mushroom bought 80% of the issued capital of Cotton Fab and on 1 April 20 13 Mushroom was itself taken over by SILK, which purchased 75% of the ordinary shares in Mushroom. Mushroom and Cotton Fab are unquoted entities. The investments made by SIL K are held as Available for Sale investments and since no reliable measure of their fair value is possible, they are subsequently measured at cost. The statement of financial positions of the three entities as at 31 October 2015 showed the following position: ASSETS Silk Mushroom Cotton Fab Property, plant and equipment Freehold land 88,000 30,000 65,000 Buildings 63,000 80,000 23,600 Plant 35,000 84,000 43,800 Investments Investment in Mushroom 135,000 Investment in Cotton Fab at cost 130,000 Current assets Inventories 108,500 75,500 68,400 Trade receivables 196,700 124,800 83,500 Cash at bank 25,200 25,400 651,400 524,300 309,700 EQUITY LIABILITIES Equity Ordinary shares of $1 each 200,000 120,000 100,000 Retained earnings 154,000 119,000 74,000 Non-current liabilities 5% preference shares of $1 40,000 Current liabilities Bank overdraft 37,400 Trade payables 240,000 200,700 71,200 Income tax 57,400 47,200 24,500 651,400 524,300 309,700