Question 1: Chambers plc
Chambers plc imports household equipment from Germany. On 1 January 2010, the company acquired 60% of the issued shares of Court Ltd, which owns a chain of retail shops selling household equipment such as washing machines and tumble dryers. Chambers supplies goods to various customers, including Court, for resale to the general public. The balance sheets of the two companies at 31 December 2010 were as follows:
* balance sheet shown in the file attached
1. The balance on Court's profit and loss account at 1 January 2010 was £150,000.
2. When Chambers plc acquired its interest in Court, it valued that company's freehold property at £200,000. Other assets of Court were taken at book value.
3. Included in Court's stock at 31 December 2010 are items which had cost that company £60,000. These had been bought from Chambers, whose selling prices are set by marking up the cost price of goods by 50%.
4. Included in Chambers' debtors is a balance due from Court of £20,000. Court's 'other creditors' includes a balance of £10,000 due to Chambers. On 30
December 2010, a cheque for £10,000 had been sent by Court to Chambers, which received and banked it on 3 January 2011.
5. 10% of the goodwill is to be written off as an impairment loss.
Required: Prepare a consolidated balance sheet for Chambers plc and its subsidiary as at 31 December 2010. (SHOW THE CALCULATIONS with notes)
Accounting for Goodwill has been a contentious issue for many years.
a. Using examples, explain alternative accounting methods that can be used in practice with respect to the treatment of goodwill arising on consolidation.
b. Discuss the advantages and disadvantages of allowing different treatments to be used under international accounting standards for items such as goodwill.
Discuss the arguments for and against allowing companies to disclose internally generated intangible assets in their financial statements.
Note: The word limit for Questions 2 and 3 (combined) is around 1,200 words. no plagiarism.
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