Required” a) “Prepare a Consolidated Balance Sheet for Harrow Ltd and Shallow Ltd as at 31 December 2020.” b) “Briefly describe the reasons why a company might wish to take over another company.”
“The Balance Sheets of Harrow Ltd and its subsidiary Shallow Ltd as at 31st December 2020 showed the following:
|
|
Harrow Ltd |
Harrow Ltd |
Shallow Ltd |
Shallow Ltd |
|
|
£000 |
£000 |
£000 |
£000 |
|
FIXED ASSETS |
||||
|
Property, plant and equipment at Net Book Value |
40,800 |
9,600 |
||
|
Investment in Shallow Ltd |
16,800 |
|||
|
|
57,600 |
9,600 |
||
|
CURRENT ASSETS |
||||
|
Stock |
12,200 |
6,400 |
||
|
Debtors |
8,900 |
5,300 |
||
|
Bank |
8,900 |
4,690 |
||
|
|
30,000 |
16,390 |
||
|
LESS CURRENT LIABILITIES |
||||
|
Creditors |
(18,000) |
(4,390) |
- |
|
|
NET CURRENT ASSETS |
12,000 |
12,000 |
||
|
|
69,600 |
21,600 |
||
|
|
||||
|
CAPITAL AND RESERVES |
||||
|
Share Capital 50p ordinary shares |
24,000 |
14,400 |
||
|
|
25,000 |
1,200 |
||
|
Retained earnings for year |
20,600 |
6,000 |
||
|
|
45,600 |
7,200 |
||
|
|
69,600 |
21,600 |
“You have been given the following additional information:”
- i) ‘Harrow Ltd bought its holding of 21,600,000 shares in Shallow Ltd on 1 January 2020.’
- ii) ‘At the
Balance Sheet date Shallow Ltd owes Harrow Ltd £4,000.’
- iii) ‘During the year Harrow Ltd sold goods to Shallow Ltd for £900,000 at cost plus a mark-up of 12.5%. 60% of these goods had been sold by Shallow Ltd by 31 December 2020, and the remainder is reflected in the stock of Shallow Ltd at the end of the year.’
- iv) ‘
Goodwill should be amortised over 10 years.’
“Required”
- a) “Prepare a Consolidated Balance Sheet for Harrow Ltd and Shallow Ltd as at 31 December 2020.”
- b) “Briefly describe the reasons why a company might wish to take over another company.”
Step by step
Solved in 3 steps
