On 31st December 2016, ABC Ltd acquired 80% of the equity share capital of XYZ Ltd at a cost of £5,000,000. The balance sheets of the two companies at 31 December 2017, and the profit and loss accounts for the year ended 31 December 2017 are as follows: ABC Ltd XYZ Ltd Balance Sheet at 31 December 2017 £’000 £’000 Fixed Assets 11000 6410 Investment in XYZ Ltd 5000 Current Assets Due from group company 900 950 Other current assets 1200 850 Current liabilities Due to Group Company -700 -900 Other current liabilities -1300 -1600 Non-Current Liabilities (external) -3000 -2500 

 

 A goodwill impairment review has been carried out and it has been determined that goodwill has been impaired by £300,000 as at 31st December 2017  On 31st December 2016, ABC Ltd paid XYZ Ltd £250,000 in respect of intercompany liabilities, but XYZ has not yet recognised this in its accounts  Other current assets mainly represent the accounts receivables the firms expect to collect from their external customers

Required

a) Prepare and critically analyse the consolidated balance sheet for the Group as at 31st December 2017 b) Construct and evaluate the consolidated profit and loss account for the Group for the year ended 31st December 2017 c) Show your workings and any assumptions that you have made d) Calculate and comment on the following ratios (of the consolidated group)  Return on capital employed  Net profit margin  Current ratio  Receivables collection period 

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