The following points are relevant to the preparation of the consolidated accounts:

1. (1) Desk plc acquired 80% of the ordinary 1 shares of Wall plc on 1 Jan 2021 for 319,000 in cash. The balance of the retained profit in Wall plc was 189,347 at acquisition. The fair value of Wall plcs non-current assets (i.e. buildings) at the date of acquisition was 30,000 higher than their book value. Wall plc does not account for this amount in its own accounts.

2. (2) Desk plc sold goods to Wall plc for 50,000 during 2021. The original cost of these goods was 40,000. Half of these goods were included in Wall plcs closing inventory on 31 Dec 2021.

3. (3) For the year ended 31 Dec 2021, goodwill impairment on the acquisition of Wall plc was determined by the directors to be 18,000.

4. (4) During 2021 Wall paid total dividends of 25,000.

5. (5) Non-controlling interest (NCI) is determined using the partial goodwill method (Method 1).

Required:

Part A:

Prepare consolidated statement of financial position (CSFP) as at 31 Dec 2021 and consolidated income statement (CIS) for the year ended 31 Dec 2021. Show clearly all supporting workings.

Part B:

Discussion Question:

Critically discuss the pre and post-acquisition reserves of a subsidiary and the accounting treatment in the consolidation process. Provide a numerical example to reinforce your discussion.

Please let me know what is unclear

Question 1 The statements of financial position as at 31 Dec 2021 and income statements for the year ended 31 Dec 2021 for Desk plc and Wall plc are set out below: Income Statements for year ended 31 Dec 2021 Statements of Financial Position as at 31 Dec 2021 Wall plc Desk plc E Wall plc Desk plc 1,551,000 (1,020,800) 530,200 (288,200) 242,000 Non-current assets E 212,740 (92.400) 120,340 (70,400 49,940 Property, Plant and Equipment 1,188,000 Sales Cost of sales Gross profit Operating expenses Profit from operations Income from Investments Interest Profit before tax Tax Profit after tax 204,600 20,000 Investment in Wall plc 319,000 (60,840) 201,160 (40,232) 160,928 (3,600) 46,340 (9.268) 37,072 1,507,000 204,600 Current assets 341,000 46,200 Inventory Trade receivables 159,408 60,443 The following points are relevant to the preparation of the consolidated accounts: (1) Desk plc acquired 80% of the ordinary 1 shares of Wall plc on 1 Jan 2021 for 319,000 in cash. The balance of the retained profit in Wall ple was 189,347 at acquisition. The fair value of Wall plc's non-current assets (i.e. buildings) at the date of acquisition was 30,000 higher than their book value. Wall plc does not account for this amount in its own accounts Cash and bank 150 165 70.732 650,573 177,375 Current liabilities 254,540 Trade payables 90,556 (2) Desk plc sold goods to Wall plc for 50,000 during 2021. The original cost of these goods was 40,000. Half of these goods were included in Wall ple's closing inventory on 31 Dec 2021. Long-term liabilities Debentures 676,000 40,000 (3) For the year ended 31 Dec 2021, goodwill impairment on the acquisition of Wall plc was determined by the directors to be 18,000. Net Assets 1,227,033 251.419 (4) During 2021 Wall paid total dividends of 25,000 Capital and reserves 400,000 50,000 (5) Share capital Non-controlling interest (NCI) is determined using the partial goodwill method (Method 1). 40,000 Share premium 787 033 201.419 Retained profits 1,227,033 251,419 MacBook Air