Question 1: Consolidated Financial Statements On 1 January 2022 Hove Ltd (Hove) acquired 60% of the ordinary shares of Stove Ltd (Stove) when the retained earnings of Stove stood at £3million.

Consideration comprised cash of £5 million and a share-for-share exchange on the basis of 1 share in Hove for every 6 held by Stove's shareholders. Hove's shares had a market value of £2.00 at that time. Hove has not yet accounted for this share exchange, and there were no other changes in share capital or share premium since acquisition. Hove chooses to value non-controlling interest at the date of acquisition at fair value, which was £3.8 million. At the acquisition date, Hove considered the fair value of one building held by Stove to have a fair value £1 million higher than its carrying value in Stove's financial statements. At that time the building had a useful life of 40 years with no residual value. Draft statements of financial position for Hove plc and Stove Ltd are shown below: Draft Statements of Financial Position as at 31 December 2022: Non-current assets Property, Plant and Equipment Investment in Stove Ltd. (Cash paid) Current assets: Inventory Trade Receivables Bank Total Current Assets Total Assets Equity and Liabilities £1 Ordinary shares Share premium Retained Earnings Total Equity Current Liabilities Trade payables Tax Total Equity and Liabilities Hove Stove £000s £000s 22,000 8,000 5,000 27,000 8,000 2,100 1,200 1,500 800 500 4,100 2,000 31,100 10,000 10,000 5,000 2,000 15,900 4,200 27,900 9,200 1,200 500 2,000 300 31,100 10,000/nQuestion 1 continued Additional Information: Hove made sales to Stove during the year ending 31 December 2022 of £2 million on which Hove earned a gross margin on sales of 25%. Stove still holds part of this inventory at 31 December 2022 which it values at £600,000. Required: Prepare the consolidated statement of financial position of the Hove group as at 31 December 2022. In addition to presenting the consolidated statement of financial position, marks are available for the following workings: (i) Goodwill (ii) Group Retained Earnings at 31 December 2022 (iii) Non-controlling interest at 31 December 2022 (Total 25 marks)