W1 plc acquired 70% of the ordinary share capital of X1 plc for £240,000 and 50% of the issued 5% cumulative preference shares for £18,000, both purchases being effected on 1 June 2023. The following balances are taken from the books of the two companies at 31 May 2024:

• Ordinary share capital (£1 shares):
  • W1 plc: £600,000
  • X1 plc: £250,000
• 5% cumulative preference shares (50p shares):
  • W1 plc: £0
  • X1 plc: £40,000
• Share premium account:
  • W1 plc: £50,000
  • X1 plc: £30,000
• General reserve:
  • W1 plc: £120,000
  • X1 plc: £40,000
• Retained profits:
  • W1 plc: £110,000
  • X1 plc: £80,000
• Trade accounts payable:
  • W1 plc: £90,000
  • X1 plc: £50,000
• Taxation:
  • W1 plc: £100,000
  • X1 plc: £60,000
• Depreciation:
  • Freehold property:
    • W1 plc: £60,000
    • X1 plc: £30,000
  • Plant and machinery:
    • W1 plc: £180,000
    • X1 plc: £90,000
• Freehold property at cost:
  • W1 plc: £150,000
  • X1 plc: £60,000
• Plant and machinery at cost:
  • W1 plc: £400,000
  • X1 plc: £250,000
• Investment in X1 plc:
  • W1 plc: £240,000
  • X1 plc: £0
• Inventory:
  • W1 plc: £200,000
  • X1 plc: £120,000
• Accounts receivable:
  • W1 plc: £70,000
  • X1 plc: £35,000
• Cash:
  • W1 plc: £40,000
  • X1 plc: £15,000

The following additional information is available: (a) Inventory of W1 plc includes goods purchased from X1 plc for £30,000. X1 plc charged out these inventory at cost plus 25%. (b) A proposed dividend of £15,000 by X1 plc includes a full year's preference dividend. No interim dividends were paid during the year by either company. (c) Creditors of W1 plc include £7,000 payable to X1 plc in respect of inventory purchases. Debtors of X1 plc include £12,000 due from W1 plc. The parent sent a cheque for £5,000 to its subsidiary on 30 May 2024 which was not received by X1 plc until June 2024.