QUESTION THREE 375 The statements of financial position of B Co and its investee companies, N Co and V Co, at 31 December 2018 are shown below. Statements of financial position as at 31 December 2018 B Co N Co V Co K'000 K000 K'000 Non-current assets Freehold property 1,950 1,250 500 Plant and machinery 795 285 Investments 1.500 4,245 1,625 785 Current assets Inventory 575 300 265 Trade receivables 330 290 370 Cash 50 120 20 955 710 655 Total assets 5.200 2.335 1.440 Equity and liabilities Equity Share capital - K1 shares 2,000 1,000 750 Retained earnings 1.460 885 390 3,460 1,885 1,140 Non-current liabilities 500 100 350 300 12% loan stock Current liabilities Trade payables Bank overdraft Total equity and liabilities 680 560 1.240 5.200 350 2.335 300 1.440 500 100 350 300 12% loan stock Current liabilities Trade payables Bank overdraft Total equity and liabilities 680 560 1.240 5.200 350 22335 300 1.440 Additional information 1. B Co acquired 600,000 ordinary shares in N Co on 1 January 2010 for K1,000,000 when the retained earnings of N Co were K200,000. 2. At the date of acquisition of N Co, the fair value of its freehold property was considered to be K400,000 greater than its value in N Co's statement of financial position. N Co had acquired the property in January, 2000 and the buildings element comprising 50% of the total value) is depreciated on cost over 50 years. 3. B Co acquired 225,000 ordinary shares in V Co on 1 January 2014 for K500,000 when the retained earnings of V Co were K150,000. 4. N Co manufactures a component used by both B Co and V Co. Transfers are made by N Co at cost plus 25%. B Co held K100,000 inventory of these components at 31 December 2018. In the same period B Co sold goods to V Co of which V Co had K80,000 in inventory at 31 December 2018. B Co had marked these goods up by 25%. 5. The goodwill in N Co is impaired and should be fully written off. An impairment loss of K92,000 is to be recognised on the investment in V Co. 6. Non-controlling interest is valued at full fair value. N Co shares were trading at K1.60 per share just prior to the acquisition by B Co. Required Prepare, in a format suitable for inclusion in the annual report of the B Group, the consolidated statement of financial position at 31 December 2018. (25 marks)