Horsefield, a public company, acquired 90% of Sandfly’s $1 ordinary shares on 1 April 20X0 paying

$3.00 per share. The balance on Sandfly’s retained earnings at this date was $800,000. On 1
October 20X1, Horsefield acquired 30% of Anthill’s $1 ordinary shares for $3.50 per share. The
statements of financial position of the three companies at 31 March 20X2 are shown below:

Horsefield Sandfly Anthill

$’000 $’000 $’000
Non-current assets
Property, plant and equipment 8,050 3,600 1,650
Investments 4,000 910 -
12,050 ¤4,510 1,650
Current assets
Inventory 830 340 250
Accounts receivable 520 290 350
Bank 240 - 100
1,590 630 700
Total assets 13,640 5,140 2,350

Equity and liabilities

Capital and reserves:
Ordinary shares of $1 each 5,000 1,200 600
Reserves:
Retained earnings b/f 6,000 1,400 800
Profit year to 31 March 20X2 1,300 800 600
7,300 2,200 1,400
12,300 3,400 2,000
Non-current liabilities
10% Loan notes 500 240 -
Current liabilities
Accounts payable 420 960 200
Taxation 220 250 150
Proposed dividends 200 100 -
Overdraft - 190 -
840 1,500 350
Total equity and liabilities 13,640 5,140 2,350

The following information is relevant:

(a) Fair value adjustments:

On 1 April 20X0 Sandfly owned an investment property that had a fair value of $120,000 in
excess of its book value. The value of this property has not changed since acquisition. Just
prior to its acquisition, Sandfly was successful in applying for a six-year licence to dispose of
 hazardous waste. The licence was granted by the government at no cost, however Horsefield
estimated that the licence was worth $180,000 at the date of acquisition.

(b) In January 20X2 Horsefield sold goods to Anthill for $65,000. These were transferred at a
mark-up of 30% on cost. Two thirds of these goods were still in the inventory of Anthill at 31
March 20X2.

(c) To facilitate the consolidation procedures the group insists that all inter-company current
account balances are settled prior to the year-end. However a cheque for $40,000 from
Sandfly to Horsefield was not received until early April 20X2. Inter-company balances are
included in accounts receivable and payable as appropriate.

(d) Anthill is to be treated as an associated company of Horsefield.

(e) The directors of Horsefield and Sandfly declared the proposed dividends on 20 March 20X2.

(f) Horsefield has not accounted for any of Sandfly’s proposed dividend.

Required:
Prepare the consolidated statement of financial position for the Horsefield Group as at 31 March
20X2.

(Adopted from ACCA Examination)