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the Grace plc group of companies as at 31 October 2012. The summarized statements of financial position of these three companies at 31 October 2012

the Grace plc group of companies as at 31 October 2012. The summarized statements of financial position of these three companies at 31 October 2012 were as follows: Non-current Assets Grace plc $m Poise plc $m Leisure plc $m Property plant equipment 2,140 1,063 720 Investment in subsidiary at cost 1,452 500 - Other investments 200 100 - Current assets Inventory 350 212 108 Trade receivables 213 127 82 Cash and bank 234 26 19 Total assets 4,589 2,028 929 Equity shares k1 shares 500 200 100 Retained earnings 3,215 1,330 510 Total equity 3,715 1,530 610 Non-current liabilities Deferred tax 500 300 200 Current liabilities Trade payables 262 151 92 Taxation payable 112 47 27 Total equity and liabilities 4,589 2,028 929 Additional Information 1. On 1 November 2011 Grace Plc. acquired 160 million of the equity shares and voting rights of Poise plc 2. Poise plc. Acquired 75 million of the equity shares and voting rights of Leisure plc on 1 November 2008 3. At the dates of share purchases the following information is known: Company earnings Date Equity shares $m Retained $,m Poise plc 1 November 2009 200 560 Poise plc 1 November 2011 200 800 Leisure plc 1 November 2009 100 240 Leisure plc 1 November 2011 100 1. With the following exceptions the fair value of assets of investee companies closely approximated their book value at the relevant acquisition dates: Company Asset Book Values $,m Fair Value $,m Poise plc Inventory* 147 197 Poise plc Equipment** 200 400 *all of this inventory had been sold by 31 October 2012 **this equipment was purchased in 2010 and is depreciated over its five year life on a straight line basis. It is still held by Poise plc. 2. During 2012, the following intra group trading took place: Selling company Buying company Sale at transfer price $,m Profit on sales Poise plc Grape plc 280 40% on cost 3. Poise plc has levied a management charge of $10 million per annum on Leisure plc for services which it provides. In 2012 Leisure plc has neither paid this charge nor accrued it as outstanding 4. The dividends payable were declared before the statement of financial position date and are therefore included as liabilities. No dividends receivable has been accrued by parent companies. 5. In the year of purchase a full years depreciation is provided in respect of non-current assets and no deprecation is provided in the year of disposal. Required: a. Prepare a Consolidate Statement of Financial Position of Grace plc as at 31 October 2013 (20 marks) b. Explain why the fair value of a companys assets is used in the preparation of consolidated financial statement(5 marks)

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