W plc acquired 70% of the ordinary share capital of X plc for £200,000 and 50% of the issued 6% cumulative preference shares for £17,000, both purchases being effected on 1 May 2022. The following balances are taken from the books of the two companies at 30 April 2023:

	W plc (£000)	X plc (£000)
Ordinary share capital (£1 shares)	400	150
6% cumulative preference shares (50p shares)	-	25
Share premium account	35	20
General reserve	85	25
Retained profits	75	50
Trade accounts payable	50	30
Taxation	60	35
Depreciation
Freehold property	60	25
Plant and machinery	140	65
Freehold property at cost	100	40
Plant and machinery at cost	320	200
Investment in X plc	200	-
Inventory	140	80
Accounts receivable	50	25
Cash	28	10

The following additional information is available: (a) Inventory of W plc includes goods purchased from X plc for £20,000. X plc charged out these inventory at cost plus 25%. (b) A proposed dividend of £10,000 by X plc includes a full year's preference dividend. No interim dividends were paid during the year by either company. (c) Creditors of W plc include £6,000 payable to X plc in respect of inventory purchases. Debtors of X plc include £10,000 due from W plc. The parent sent a cheque for £4,000 to its subsidiary on 30 April 2023 which was not received by X plc until May 2023. (d) At 1 May 2022 the balances on the reserves of X plc were as follows:

• Share premium: £10,000
• General reserve: £20,000
• Retained profits: £30,000

Required:                 

1. Prepare a consolidated balance sheet for W plc and its subsidiary X plc at 30 April 2023. Notes to the accounts are not required. Workings must be shown.
2. Explain the accounting treatment of goodwill in the consolidated financial statements.