Section A: Wholly Owned Subsidiary $(25$ marks$)$

$1.$ Mat Ltd purchased $100\%$ of the shares in Carpet Ltd on $31$ December $2017.$ The statements of financial position for the two companies as of $31$ December $2018$ are provided below.

Statement of Financial Position as at $31$ December $2018$ Mat Ltd Carpet Ltd

Investment in Subsidiary $150,000-$

Non$-$Current Assets $120,000108,000$

Current Assets $80,00042,000$

Total Assets $350,000150,000$

Share Capital $180,000100,000$

Retained Earnings $(31\mathrm{.}12\mathrm{.}2017)105,00020,000$

Retained Earnings $(31\mathrm{.}12\mathrm{.}2018)45,00025,000$

Current Liabilities: Accounts Payables $20,0005,000$

Total Equity and Liabilities $350,000150,000$

a$.$ Prepare the consolidated statement of financial position for Mat Ltd and its wholly owned subsidiary Carpet Ltd as of $31$ December $2018.(15$ marks$)$

b$.$ Explain the consolidation adjustments required when preparing the consolidated statement of financial position for a wholly owned subsidiary. $(5$ marks$)$

c$.$ Discuss the treatment of inter$-$company balances and unrealized profits in the consolidated financial statements. $(5$ marks$)$