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

$120,000$

$108,000$

Current Assets

$80,000$

$42,000$

Total Assets

$350,000$

$150,000$

Share Capital

$180,000$

$100,000$

Retained Earnings $(31\mathrm{.}12\mathrm{.}2017)$

$105,000$

$20,000$

Retained Earnings $(31\mathrm{.}12\mathrm{.}2018)$

$45,000$

$25,000$

Current Liabilities: Accounts Payables

$20,000$

$5,000$

Total Equity and Liabilities

$350,000$

$150,000$

$$

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