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You work for a large accounting firm KMPG as a Senior Accountant. Your client Bear plc acquired shares in Wolf plc several years back and

You work for a large accounting firm KMPG as a Senior Accountant. Your client Bear plc acquired shares in Wolf plc several years back and you are responsible for the preparation of the year end work.

The following are the Statements of financial position for Bear plc and Wolf plc as at 31 March 2020, together with the additional information provided below.

Bear plc

Wolf plc

Non-Current Assets

Land and buildings

975,000

220,000

Plant and equipment

245,000

75,000

Fixtures and fittings

375,000

54,500

Intangibles: Development costs

30,000

Investment in Wolf plc

350,000

Total Non-Current Assets

1,975,000

349,500

Current Assets

Inventory

625,000

165,000

Trade and other receivables

105,000

76,450

Cash and cash equivalents

65,200

24,500

Total Current Assets

795,200

265,950

Total Assets

2,770,200

615,450

Equity

Ordinary shares (1)

700,000

120,000

Preference shares (1)

300,000

30,000

Retained earnings

1,427,750

335,000

Total Equity

2,427,750

485,000

Current Liabilities

Trade payables

105,000

42,500

Taxation

82,450

33,450

Dividends

95,000

32,000

Total Current Liabilities

282,450

107,950

Non-Current Liabilities

Bank Loan

60,000

22,500

Total Non-Current Liabilities

60,000

22,500

Total Equity and Liabilities

2,770,200

615,450

Notes to the above financial statements:

  1. Bear acquired 84,000 ordinary shares in Wolf on 31 March 2017. They also acquired 15% of the preference shares.

  1. At the date of acquisition, the retained earnings of Wolf plc were 205,000.

  1. During the year, Bear sold goods to Wolf for 10,400 which included a mark-up on cost of 30%. At the end of the year, 50% of this stock was still held by Wolf plc.

  1. At the date of acquisition, the land and buildings of Wolf plc had a fair value of 50,000 more than their book value. This fair value increase has not been incorporated into the statement of financial position for Wolf plc. Land accounts for 20% of this amount. Wolf acquired the building on 1 April 2012. The group policy is to depreciate buildings over a period of 50 years.

  1. Wolf spent 42,000 on developing a new and innovative product. Wolfs policy is to expense development costs, however, it is Bears policy to capitalise development costs (i.e. treat it as an asset). The following provides a breakdown of expenditure by Wolf:

Development costs up to 31 March 2017 32,000

Development costs after 31 March 2017 10,000

  1. On the 31March 2020, an impairment test was carried out on the goodwill arising from the acquisition of Wolf plc. The report indicated that the goodwill needs to be written down by 10,000.

  1. Wolf declared a dividend to its ordinary shareholders on 15 March 2020 which remained unpaid by 31 March 2020. Bear has not accounted for this income in their financial statements.

YOU ARE REQUIRED TO:

  1. Prepare the consolidation schedule for Wolf plc at 31 March 2020.

Show workings + Use the following headings: Total - Pre - Post - NCI

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