[JapJap88]

The balance sheets of A and its investee undertakings, B and C, as at 30 September 20X6
(the accounting date of all three companies) are given below:

A B C
$000 $000 $000 $000 $000 $000
Non-current assets (note 1 and 3)
Tangible assets 9,100 9,000 8,000
Investments 8,900 18,000 - 9,000 - 8,000

Current assets (note 3)
Stocks 4,000 3,000 2,500
Trade receivables 3,000 2,500 2,000
Cash in hand 800 7,800 700 6,200 600 5,100
25,800 15,200 13,100
Equity and liabilities
Equity
Called up share capital ($1 shares) 5,000 4,000 4,000
Retained earnings 5,900 3,400 2,500
10,900 7,400 6,500
Non-current liabilities
Long term loan (note 3) 8,000 2,000 2,000

Current liabilities (note 3)
Trade payable 2,500 2,000 1,700
Taxation 1,200 1,000 450
Bank overdraft 3,200 6,900 2,800 5,800 2,450 4,600
25,800 15,200 13,100




Notes
1. On 15 June 20X0 (the date of incorporation of B), A subscribed for 3.2 million shares in B at par. No new share has been issued by B since its incorporation.
2. On 1 June 20X6, A purchased 3 million shares in C at an agreed value of $1.90 per share. The purchase was financed by an additional issuance of loan stock, carrying an interest rate of 10%.
3. C produced interim financial statements, drawn up as at 1 June 20X6, in connection with the acquisition by A. The balance sheet of C at that date showed the following:
$000 $000
Tangible non-current assets (note 4) 7,875 Trade payable 1,600
Inventory (note 5) 2,000 Taxation 300
Trade receivables 1,450 Bank overdraft 1,825
Cash in hand 600 Long term loan (note 6) 2,000
Share capital ($1 shares) 4,000
Retained earnings 2,200
11,925 11,925

4. The non-current assets of C at 1 June 20X6 had a total purchase cost to C of $13.5 million and a gross replacement cost of $14.22 million. They were all being depreciated at 25% per annum pro rata on that cost. This policy is also appropriate for the consolidated financial statements of A. The assets’ market value at 1 June 20X6 was $8,295,000. No non-current assets of C which were included in the interim financial statements drawn up as at 1 June 20X6 were disposed of by C prior to 30 September 20X6. No fixed asset was fully depreciated by 30 September 20X6.
5. The inventories of C which were shown in the interim financial statements at cost to C as $2 million would have cost $2.1 million to replace at 1 June 20X6 and had an estimated net realizable value at that date of $2.4 million. Of that stock C has in hand at 1 June 20X6, goods costing C $1.5 million were sold for $1.8 million between 1 June 20X6 and 30 September 20X6.
6. The long term loan of C carries a rate of interest of 10% per annum, payable on 31 May annually in arrears. The loan is redeemable at par on 31 May 20X9. The interest cost is representative of current market values. The accrued interest payable by C at 30 September 20X6 is included in the trade creditors of C at that date.
7. On 1 June 20X6, A took a decision to rationalize the group so as to integrate C. The costs of the rationalization (which were to be borne by A) were estimated to a total of $1.5 million and the process was publicly announced on 1 August 20X6 and due to start on 1 December 20X6. No provision for these costs has been made in any of the financial statements given in this question.
Required:
Prepare the consolidated balance sheet of ‘A’ Group as at 30 September 20X6. (Show ALL your workings. ALL your numerical workings can be rounded to the nearest $000.)