The financial statements of Father Ltd and Son Ltd for the year 2019 are as follows:

Statement of Comprehensive Income & Equity Extract
for the year ended 31 December 2019
Father	Son
$000	$000
Sales	1,400	680
Cost of Goods	(900)	(500)
Gross Profit	500	180
Operating Expenses	(246)	(120)
Operating Profit	254	60
Dividend Income	24	-
Profit before Tax	278	60
Income Tax	(56)	(12)
Profit after Tax	222	48
Dividends Paid	(50)	(30)
Beginning Retained Profits	80	137
Ending Retained Profits	252	155
Statement of Financial Position as at 31 December 2019
Father	Son
$000	$000
ASSETS
Fixed Assets	410	240
Investment in Son Ltd	340	-
Cash at Bank	20	82
Inventories	90	68
Trade Debtors	50	90
Other Assets	30	25
940	505
LIABILITIES & SHAREHOLDERS’ EQUITY
Trade Creditors	150	92
Other Liabilities	38	58
Share Capital	500	200
Retained Profits	252	155
940	505

ADDITIONAL INFORMATION:

Father Ltd acquired 70% of the shares of Son Ltd on 1 January 2017. On this date, all the identifiable assets & liabilities in Son Ltd were stated at fair value except for the following:

Inventories, reported at book value of only $80,000, have a higher fair value of $110,000.

The fair value of land in Son Ltd is $18,000 lower than the recorded book value.

Son Ltd.’s shareholders’ equity on acquisition date comprised the following:

Share Capital	$ 200,000
Retained Profits	$ 55,000

To help you prepare the group accounts for the year ended 31 December 2019, you have also gathered the following:

Son Ltd bought a machine from Father Ltd for $270,000 at the beginning of the previous financial year, on 1 January 2018. On this date, the net book value of the machine was $220,000 (cost $330,000 less accumulated depreciation $110,000).

Father Ltd.’s policy was to depreciate the machine over its useful life (6 years as at the original date of purchase, 1 January 2016) using the straight line method. Son Ltd continued to depreciate the machine over its remaining useful life.

Son Ltd’s inventories as at 1 January 2017 were all sold to third parties by 31 May 2018. There was no intragroup sale of inventories.

As at 31 December 2019, there was no intra-group indebtedness.

REQUIRED:

a)   Prepare all the necessary consolidation journal entries on 31 December 2019. Narrations are not required.

b)   Consolidated accounts cannot adequately help potential investors understand and assess in detail the financial performance of a group’s associates. Briefly discuss why this is so.