Harry Ltd. has several investments. On 01/01/2020 Harry Ltd. acquired 54% of the ordinary shares of...

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Harry Ltd. has several investments. On 01/01/2020 Harry Ltd. acquired 54% of the ordinary shares of Company A and 40% of the ordinary shares of Company B. The Statement of Financial Position on 31/12/2020 of the different companies is as follows: Non-current Assets Property, Plant and equipment Investment on Company A Investment on Company B Current Assets Inventory Trade receivables Cash Total Assets Equity Capital (ordinary shares) General reserve Retained earnings Non-current Liabilities Long-term debt Current Liabilities Harry Ltd. 25,000 65,000 32,000 100,000 30,000 20,000 Company Company B A 15,000 2,000 30,000 1,000 75,000 500 242,000 46,500 52,000 43,000 20,000 2,600 5,250 1,000 Trade payables 40,000 17,650 Total Equity and Liabilities 242,000 46,500 50,000 14,000 12,000 30,000 106,000 62.000 21,000 5,000 18.000 106,000 On the acquisition date, Company B had General reserve of £1,200 and retained earnings of £3,000. For the Company A, consider that there are no changes in the value of equity between the acquisition and the reporting date. Required: a) Explain what type of investment Company A and Company B represent for Harry Ltd. b) Prepare the consolidated statement of financial position for Harry Ltd. on 31/12/2020. c) Prepare the consolidated statement of financial position for Harry Ltd. on 31/12/2020 considering that, on the acquisition date, Company B had General reserve of £2,600 and retained earnings of £5,250. d) Do you recommend Harry Ltd. to have investments as Company A and Company B? Explain your answer in detail. Harry Ltd. has several investments. On 01/01/2020 Harry Ltd. acquired 54% of the ordinary shares of Company A and 40% of the ordinary shares of Company B. The Statement of Financial Position on 31/12/2020 of the different companies is as follows: Non-current Assets Property, Plant and equipment Investment on Company A Investment on Company B Current Assets Inventory Trade receivables Cash Total Assets Equity Capital (ordinary shares) General reserve Retained earnings Non-current Liabilities Long-term debt Current Liabilities Harry Ltd. 25,000 65,000 32,000 100,000 30,000 20,000 Company Company B A 15,000 2,000 30,000 1,000 75,000 500 242,000 46,500 52,000 43,000 20,000 2,600 5,250 1,000 Trade payables 40,000 17,650 Total Equity and Liabilities 242,000 46,500 50,000 14,000 12,000 30,000 106,000 62.000 21,000 5,000 18.000 106,000 On the acquisition date, Company B had General reserve of £1,200 and retained earnings of £3,000. For the Company A, consider that there are no changes in the value of equity between the acquisition and the reporting date. Required: a) Explain what type of investment Company A and Company B represent for Harry Ltd. b) Prepare the consolidated statement of financial position for Harry Ltd. on 31/12/2020. c) Prepare the consolidated statement of financial position for Harry Ltd. on 31/12/2020 considering that, on the acquisition date, Company B had General reserve of £2,600 and retained earnings of £5,250. d) Do you recommend Harry Ltd. to have investments as Company A and Company B? Explain your answer in detail.

Answer rating: 100% (QA)

a Company A represents a majority interest investment for Harry Ltd as it holds 54 of the ordinary s... View the full answer