Question 1 On 2 July 2005, H Ltd. purchased the entire issued ordinary share capital of S Ltd. On this date, S Ltd. had a retained income balance of R4 000 and no general reserve. Any purchase difference is to be attributed to the fixed assets of S Ltd. On 30 June 2007, the trial balances of the two companies were as follows: H Ltd. S Ltd. R Share capital (R1 ordinary shares) General reserve Retained income Accumulated depreciation 40 000 20 000 10 000 5 000 34 000 10 000 6 000 R90 000 R35 000 Fixed assets at cost Investments in S Ltd. Net current assets 30 000 14 000 36 000 24 000 21 000 R90 000 R35 000 Included in the net current assets of both companies is a dividend due by S Ltd. to H Ltd. of R2 000. Note: Required Draw up a consolidated balance sheet of H Ltd. and subsidiary S Ltd. on 30 June 2007.
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- Financial Accounting II / © ICCG / Page 46 Question 1 The following figures were extracted from head office books of the HPD Co., and submitted by the branches as at 31 December 2006. Head Office Durban Branch Prieska Branch Cash at bank (Dr) Branch account Durban (Dr) Branch account Prieska (Dr) Creditors Debtors Furniture and fittings at cost Head office account (Cr) Land and buildings at cost Vehicles at cost 10 000 3 000 2 000 4 800 4 800 4 600 2 000 1 000 7 000 6 000 4 000 1 500 1 500 2 000 4 600 4 900 12 000 4 000 1 000 Depreciation provision Furniture and fittings 1 000 400 300 Vehicles 2 000 400 Owner's capital 50 000 Stock at 31 December Administration expenses Gross profit 4 000 3 000 5 800 10 000 2 000 3 000 7 600 30 000 31 000 Durban Branch sent goods valued at R200 to Prieska Branch. The entries were made in the branch books, but not in the head office books. Prieska sent Head Office R100, which was only received on 3 January 2002. Required Pass all journal entries…sub parts to be solved a) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30%. b) On 1 July 2016, Liala ltd sold an item of plant to Jordan Ltd Ltd for $150,000 when its carrying value in Liala Ltd book was $200,000 (costs $300,000, accumulated depreciation $100,000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs…Q5 On 3 May 2016, Mashego Limited acquired 75% (and control) of Mahlangu Limited’s outstanding ordinary shares for R112 000. The fair value of the non-controlling interest was equal to a proportionate share of the book value of Mahlangu Limited’s net assets at the date of acquisition. The selected balance sheet data for the two companies as at 30 April 2016 are as follows: Mashego Mahlangu Limited Limited R R Total assets 504 000 216 000 Liabilities 144 000 72 000 Ordinary shares 120 000 60 000 Retained earnings 240 000 84 000 Equity & liabilities 504 000 216 000 What amount should be recorded as investment in subsidiary in the separate statement of financial position for Mashego Limited at 30 April 2016? Select one: a. R108 000 b. R112 000 c. R144 000 d. R216 000
- According to IFRS 10 one of the first adjustments which should be made in consolidated statements is the elimination of the investment in the parent’s books and the owners’ equity section in the subsidiary’s books as at the date of acquisition Statements of Financial Position as at 30 June 2008: A Ltd B Ltd ASSETS R R Investment in B Ltd: 10 000 Ordinary shares at fair value 10 000 - Cash and cash equivalents 10 000 10 000 20 000 20 000 EQUITY AND LIABILITIES Share capital -20 000 ordinary shares 20 000 - -10 000 ordinary shares - 10 000 20 000 10 000 In A Ltd group consolidated statement of financial position how much will be recognised as share capital? Select one: a. R10 000 b. R40 000 c. R30 000 d. R20 000C4) Helta Ltd acquired 100% of the share capital of Buzz Ltd on 1 January 2021. On that date, Helta Ltd began implementing a major change in the nature of Buzz Ltd’s trade. The trading profits/(losses) of each company for the two years ended 31 March 2021 are: Buzz Ltd Helta Ltd ££ Year ended 31 March 2020 80,000 20,000 Year ended 31 March 2021 100,00 20,000 The profits and losses are generated evenly throughout these periods. Neither company has any other income or gains, nor any other associated companies. Required: State, with supporting calculations, how relief is obtained for Buzz Ltd’s loss of £100,000, on the basis that the companies claim relief for losses as soon as possible.On 1 July 2013 Donald Ltd acquired all of the share capital (cum div) of Duck Limited for a consideration of $600,000 cash and a brand that was held in their accounts at a fair value of $50,000. Duck Ltd reported a dividend payable of $8,000 at 1 July 2013. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $18,000.The land was sold on 30/12/16 for $90,000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Duck Ltd consisted of: Share capital 420000 General reserve 90000 Retained earnings 70000 Assume a tax rate of 30%. Required A. Prepare the acquisition analysis at 1 July 2013.B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013.C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017. Answer all the subparts A,B,C .if…
- Nick Ltd acquired 100% of the issued capital of Wing Ltd on 1 July 2011 for $270000. The statements of financial position of the companies immediately after the acquisition are provided below. All assets have been reported following fair value. Statement of Financial Position For the year ended 1 July 2011 Nick Ltd Wing Ltd Shareholders' equity Share capital General reserve Retained earnings Total shareholders' equity 450,000 45,000 140,000 635,000 180,000 25,000 20,000 225,000 Assets Current assets Cash at Bank Accounts Receivable 50,000 20,000 100.000 170,000 30,000 10,000 25.000 65,000 Inventory Non-current assets Investment in Wing Ltd Land Plant & Equipment 270,000 250,000 100,000 620.000 790.000 200,000 80.000| 280.000 345.000 Total assets Liabilities Current liabilities Accounts Payable Interest Payable 40,000 10,000 15.000 L.000 55,000 18,000 Non-current liabilities Bank loan Total liabilities Net assets 100,000 155,000 635,000 102,000 120,000 225,000 Required 1. Calculate…que 5 Tinto Ltd obtained control of Suda ltd by acquiring 80% of the issued share capital of Suda ltd at 1 January 2015. The consideration is to be settled as follows: · A cash payment of R1 000 000 · The fair value of machine is R500 000 is recorded in Tinto ltd · Tinto ltd will issue new shares to the seller, to the value of R600 000 Journalize the above transaction in the books of Tinto ltd.On 1 July 2021, James Ltd acquired all the issued shares of Dean Ltd for $350,000. At this date, the financial statements of Dean Ltd showed the following: $ Share capital 270,000 Retained earnings 26,500 General Reserve 8,800 Total equity 305,300 Goodwill 25,000 At acquisition date, all the net identifiable assets and liabilities in Dean Ltd were recorded at amounts equal to their fair value except for: Asset Carrying amount ($) Fair Value ($) Inventories 15,000 18,000 Plant (cost $400,000) 210,000 220,000 The Plant was calculated to have a further life of 5 years, and was depreciated on a straight-line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: Prepare the acquisition analysis at 1 July 2021. Prepare the consolidation entries at acquisition date, 1 July 2021. Include narrations for each entry. Prepare the consolidation worksheet as at 1 July 2021. Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2021 in narrative format.
- X CO. Ltd. agrees to acquire, as a going concern, the business of Y Co. Ltd. on the basis of vendor's Balance Sheet at 31* March, 2016 which is as follows: 1. Equity and Liabilities 2$ (1) Shareholders' Funds (a) Share Capital : Authorised Capital : 25,000 Shares of $50 each 12,50,000 Issued Capital : 20,000 Shares of $50 each 10,00,000 Called-up Capital : 20,000 Shares of $50 each, $30 called up 6,00,000 (b) Reserves and Surplus: Reserves Fund 1,25,000 Surplus Account 60,000 (2) Current Liabilities Creditors 75,000 Total Equity and Liabilities 8,60,000 II. Assets (1) Non-current Assets Fixed Assets : Freehold Property 2,50,000 Plant and Machinery 50,000 Investment : 6% Govt. Papers 10,000 (2) Current Assets Stock 3,00,000 Debtors ($ 2,30,000 –10,000 Provision) 2,20,000 Cash at Bank 30,000 Total Assets 8,60,000 X Co. Ltd. took over all the assets and liabilities of the vendor company, subject to the retention of $15,000 cash to provide for cost of liquidation, income-tax etc. and to…statements of financial position of the companies immediately after the acquisition were as follows Problem 12.20 (Goodwill) Joplin Ltd acquired 100% of the issued capital of Hendrix Ltd on 1 July 20X0 for $290 000. The (all assets stated at their fair values): Statements of Financial Position for the year ended 1 July 20X0 Joplin Ltd 24 Hendrix Ltd %24 Shareholders' equity Share capital 400 000 200 000 General reserve 40 000 20 000 Retained earnings 30 000 120 000 560 000 Total shareholders' equity 250 000 Assets Current assets 130 000 55 000 Investment in D Ltd 290 000 310 000 365 000 Other non-current assets 455 000 Total assets 875 000 Liabilities Current liabilities 145 000 35 000 Non-current liabilities 170 000 80 000 Total liabilities 315 000 115 000 560 000 250 000 Net assetsAdjustments where the investor does and does not prepare consolidated financial statements On 1 July 2021, Saltwater Ltd acquired a 30% interest in one of its suppliers, Crocodile Ltd, at a cost of $13 650. The directors of Saltwater Ltd believe they exert ‘significant influence’ over Crocodile Ltd. The equity of Crocodile Ltd at acquisition date was as follows. All the identifiable assets and liabilities of Crocodile Ltd at 1 July 2021 were recorded at fair values except for some depreciable non-current assets with a fair value of $15 000 greater than carrying amount. These depreciable assets are expected to have a further 5-year life. Additional information At 30 June 2022, Saltwater Ltd had inventories costing $60 000 on hand which had been purchased from Crocodile Ltd. A profit before tax of $10 000 had been made on the sale. At 30 June 2023, Saltwater Ltd had inventories costing $100 000 on hand which had been purchased from Crocodile Ltd. A profit before tax of $30…