Draft statements of financial position of Spyder and its subsidiary Phly are shown. The following information is available:

(1) Spyder purchased 480 million shares in Phly some years ago when Phly had a credit balance of £95 million in reserves, and shares in Phly were quoted at 130p.

(2) At the time of acquisition Phly’s land and buildings were valued at £70 million more than their book value.

(3) Phly’s inventory as at 31.10.2012 includes goods sold to it by Spyder at a price giving Spyder £12 million profit.

(4) As at 31.10.2012 Phly owes Spyder £25 million for goods purchased.

Required:

(a) Calculate the goodwill on acquisition.

(b) Prepare the Consolidated Statement of financial position as at 31 October 2012.

(c) Explain the accounting treatment of intra-group trading and inter-company balances when preparing consolidated financial statements.

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Statements of financial position as at 31.10.2012 Non-current assets: Land and buildings Plant Investments in Phly shares Current assets: Inventory Trade receivables Bank Spyder Phly £'000 £'000 315 285 660 357 525 158 2,300 278 220 252 126 30 906