This question concerns an associated company making a loss and possible impairment of goodwill.
Hyson plc acquired a 30% interest in the ordinary shares of Green plc on 1 January 20X3 when Green’s general reserve was £25,000 and its retained earnings were £40,000.
In the year ended 31 December 20X8 Green made a loss after tax of £65,000 because of a recession in its principal sales market.
The statements of financial position of Hyson plc and Green plc at 31 December 20X8 are as follows:
The statements of income of Hyson and Green for the year ended 31 December 20X8 are:
Because of the losses of Green in 20X8, the recoverable amount of a 30% interest in Green is £40,000 at 31 December 20X8.
(a) Prepare a consolidated statement of financial position of Hyson plc as at 31 December 20X8.
(b) Prepare a consolidated statement of income of Hyson plc, including the associated company Green, for the year ended 31 December 20X8.
(c) State the changes to your answers in (a) and (b) above if the recoverable amount of a 30% interest in Green was £65,000.
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