Show written discussion and calculation to the questions (required). paste your answers into the answer box, explain methodology and calculations.

QUESTION 1: MAGIC PLC

Magic Plc is a leading engineering company. On 1 Jan 2020 it acquired 75% of the issued shares of Circus Ltd and gained control. The statements of financial position of the two companies as at 31 December 2020 were as follows:

	Magic Plc	Circus Ltd
	'000	'000
Non-current assets
Freehold property	950	570
Plant and equipment	780	420
Investment in Circus Ltd	1,460
Current assets
Inventory	670	380
Trade receivables	590	475
Cash and cash equivalents	650	520
TOTAL ASSETS	5,100	2,365
Current liabilities
Trade payables	610	425
Non-current liabilities
Debentures	830	240
TOTAL LIABILITIES	1,440	665
NET ASSETS	3,660	1,700
Equity
Ordinary share capital	850	700
Share premium	240	170
Retained earnings	2,570	830
	3,660	1,700

The following information is relevant:

1. The balance of Circus Ltd's retained earnings at 1 Jan 2020 was 590,000.

2. On the date of the acquisition, the fair value of Circus Ltd' freehold property was 270,000 in excess of the book values. Circus Ltd does not account for this amount in its own accounts. Magic Plc depreciates its property using the straight line and at 1 Jan 2020, these assets had a remaining useful life of 15 years.

3. On 1 Jul 2020, Circus Ltd sold inventory to Magic Plc at a price of 210,000. Magic Plc sets its selling prices by marking up the cost by 40%. By 31 December 2020, Magic Plc has sold only half of this inventory to third parties.

4. Included in Magic Plc's trade payables is a balance due to Circus Ltd of 51,000. Circus Ltd's trade receivables include a balance of 51,000 owing from Magic Plc.

5. Goodwill arising on acquisition is subject to impairment review. For the year ended 31 Dec 2020, the directors estimate that goodwill has been impaired by 44,000.

Required:

Make a consolidated statement of financial position (CSFP) for Magic Plc and its subsidiary as at 31 December 2020.

Show written discussion and calculation to the questions (required). paste your answers into the answer box, explain methodology and calculations.