The following financial statements of Andy Ltd and its subsidiary Irons Ltd have been extracted from their financial records at 30 June 2012.

Reconciliation of opening and closing retained earnings Sales revenue Cost of goods sold Gross profit Dividends received from Irons Ltd Management fee revenue Gain on sale of plant Expenses Administrative expenses Depreciation Management fee expense Other expenses Profit before tax Tax expense Profit for the year Retained earnings - 30 June 2011

Dividends paid Retained earnings - 30 June 2012

Andy Ltd $

862 500 (580 000) 282 500 93 000 33 125 43 750

(38 500) (30 625) - (126 375) 256 87576 875 180 000399 250 579 250 (171 750)

Irons Ltd $

725 000 (297 500) 427 500 -

(48 375) (71 000) (33 125)(96 250) 178 75052 750 126 000299 000 425 000 (116 250) 407 500 308 750

Page | 4

Statement of financial position Shareholders' equity Retained earnings Share capital Current liabilities Tax payable

Non-current liabilities Loans

Current assets Accounts receivable Inventory Non-current assets Land and building Plant - at cost Accumulated depreciation Investment in Irons Ltd

Andy Ltd $

407 500 437 500

100 000

236 000 1 181 000

74 250 115 000

198 750 400 000 (107 000) 500 000

Irons Ltd

$

308 750 250 000 57 875 31 250

145 000 792 875

77 875 36 250

407 500 444 750 (173 500)

1 181 875 792 875

Other Information Andy Ltd acquired its 100 percent interest in Irons Ltd on 1 July 2005 that is seven years earlier. The cost of the investment was $500 000. At that date the capital and reserves of Iron Ltd were:Share capital $250 000Retained earnings $200 000$450 000At the date of acquisition all assets were considered to be fairly valued. During the year Andy Ltd made total sales to Irons Ltd of $81 250, while Irons Ltd sold$65000 in inventory to Andy Ltd. The opening inventory in Andy Ltd as at 1 July 2011 included inventory acquired from IronsLtd for $52 500 that cost Irons Ltd $43 750 to produce.

Page | 5

The closing inventory in Andy Ltd includes inventory acquired from Irons Ltd at a cost of$42000. This cost Irons Ltd $35 000 to produce. The closing inventory of Irons Ltd includes inventory acquired from Andy Ltd at a cost of$15000. This cost Andy Ltd $12 000 to produce. The management of Andy Ltd believes that goodwill acquired was impaired by $3750 in the current financial year. Previous impairments of goodwill amounted to $20 000. On 1 July 2011 Andy Ltd sold an item of plant to Irons Ltd for $145 000 when its carrying value inAndy Ltd'saccountswas$101250(cost$168750,accumulateddepreciation $67500). This plant is assessed as having a remaining useful life of six years. Irons Ltd paid $33 125 in management fees to Irons Ltd Ltd. The tax rate is 30 percent.

Required:Prepare a consolidated statement of financial position and a consolidated statement of comprehensive income for Andy Ltd and Irons Ltd as at 30 June 2012, including a note reconciling opening and closing retained earnings.