U plc acquired 80% of the ordinary share capital of V plc for £190,000 and 55% of the issued 8% cumulative preference shares for £18,000, both purchases being effected on 1 April 2022. The following balances are taken from the books of the two companies at 31 March 2023:

U plc has an ordinary share capital of £500,000 and V plc has an ordinary share capital of £200,000. The 8% cumulative preference shares of U plc are valued at £0, while those of V plc are valued at £35,000. U plc's share premium account stands at £45,000 and its general reserve at £90,000, with retained profits amounting to £70,000. V plc has a share premium account of £25,000, a general reserve of £30,000, and retained profits of £40,000.

U plc has trade accounts payable of £55,000 and taxation payable of £60,000, while V plc has trade accounts payable of £35,000 and taxation payable of £30,000. The depreciation on freehold property for U plc is £45,000 and for V plc is £20,000. The depreciation on plant and machinery for U plc is £130,000 and for V plc is £55,000.

U plc's freehold property at cost is £110,000 and its plant and machinery at cost is £250,000. V plc's freehold property at cost is £40,000 and its plant and machinery at cost is £150,000. U plc's investment in V plc is valued at £190,000, while V plc has no such investment. The inventory of U plc is valued at £120,000 and that of V plc at £70,000. U plc has accounts receivable amounting to £40,000 and cash amounting to £25,000. V plc has accounts receivable amounting to £20,000 and cash amounting to £10,000.

The following additional information is available: (a) Inventory of U plc includes goods purchased from V plc for £15,000. V plc charged out these inventory at cost plus 25%. (b) A proposed dividend of £9,000 by V plc includes a full year's preference dividend. No interim dividends were paid during the year by either company. (c) Creditors of U plc include £5,000 payable to V plc in respect of inventory purchases. Debtors of V plc include £10,000 due from U plc. The parent sent a cheque for £3,000 to its subsidiary on 29 March 2023 which was not received by V plc until April 2023. (d) At 1 April 2022 the balances on the reserves of V plc were as follows:

• Share premium: £8,000
• General reserve: £15,000
• Retained profits: £25,000

Required:

1. Prepare a consolidated balance sheet for U plc and its subsidiary V plc at 31 March 2023. Notes to the accounts are not required. Workings must be shown.
2. Discuss the treatment of preference shares in the consolidated financial statements.