COURSE: ACCOUNTING IIB
FAO Q1-2018
-2QUESTION 1
(55 MARKS)
(60 MINUTES)
You have been presented with the following abridged financial statements of Anna Ltd and Elsa Ltd
for the reporting period ended 31 December 2018.
STATEMENT OF FINANCIAL POSITION FOR THE REPORTING PERIOD ENDED 31
DECEMBER 2018
Anna Ltd
Elsa Ltd
ASSETS
Buildings
2 750 000
215 560
Plant and equipment
1 880 000
859 500
Cost price
Accumulated depreciation
Investment in Elsa Ltd at fair value:
160 000 ordinary shares (cost price: R1 000 000)
90 000 10% preference shares
Inventories
Trade receivables
Bank
EQUITY AND LIABILITIES
R5 - ordinary share capital
R1 - 10% preference share capital
Mark-to-market reserve
Retained earnings
Trade payables
3 150 000
(1 270 000)
1 480 000
(620 500)
1 250 000
150 000
360 500
970 280
184 500
7 545 280
625 000
368 000
80 000
2 040 280
5 000 000
1 000 000
300 000
577 280
163 000
2 040 280
250 000
1 944 280
351 000
7 545 280
STATEMENTS OF CHANGES IN EQUITY FOR THE REPORTING PERIOD ENDED 31
DECEMBER 2018
Mark-to-market
Retained earnings
reserve
Anna Ltd
Anna Ltd
Elsa Ltd
Balance at 1 January 2018
Profit for the year
Other comprehensive income
Dividend paid - Ordinary dividend
- Preference dividend
Balance at 31 December 2018
200 000
1 602 750
541 530
253 200
379 080
(200 000)
(25 000)
(30 000)
577 280
50 000
250 000
1 944 280
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE REPORTING PERIOD ENDED 31 DECEMBER 2018
Anna Ltd
Revenue
Cost of sales
Gross profit
Other income
Net operating expenses
Profit before tax
Tax
Profit for the year
2 430 125
(1 337 500)
1 092 625
158 000
(498 500)
752 125
(210 595)
541 530
Elsa Ltd
810 000
(115 000)
695 000
106 000
(274 500)
526 500
(147 420)
379 080
COURSE: ACCOUNTING IIB
FAO Q1-2018
-3QUESTION 1 (CONTINUED)
ADDITIONAL INFORMATION:
1.
On 1 January 2012 Anna Ltd acquired an interest in the ordinary shares of Elsa Ltd. On that
date the equity of Elsa Ltd consisted of:
Ordinary share capital (R5 shares)
Retained earnings
R1 000 000
R87 000
2.
Since acquisition date, Anna Ltd purchases inventory from Elsa Ltd at cost plus 25%. On the
31 December 2018, R12 500 of the inventory purchased from Elsa Ltd was still on hand. There
was no inventory purchased from Elsa Ltd in the opening stock of Anna Ltd for 2018.
3.
Total intra-group sales for the current reporting period ended 31 December 2018 amounted to
R230 000.
4.
On 1 January 2017, the management of Elsa Ltd sold a vehicle with a carrying amount of
R166 000 on that date for R212 000 to Anna Ltd. Depreciation is written off using the straight
line method. The remaining useful life was estimated to be 5 years on date of sale.
5.
On 1 November 2018, Anna Ltd purchased 90 000 preference shares for R150 000 from Elsa
Ltd.
6.
Elsa Ltd declared and paid ordinary and preference dividends during the current reporting
period. Anna Ltd included their share of the dividends declared and paid by Elsa Ltd in “Other
income”.
7.
Anna Ltd classified the equity investment in Elsa Ltd under IFRS 9 in its separate financial
statements and recognised all fair value adjustments in other comprehensive income in the
mark-to-market reserve.
8.
It is the accounting policy of Anna Ltd to measure non-controlling interest in ordinary shares at
the fair value on the date of acquisition. At that date the directors of Anna Ltd were of the
opinion that the non-controlling interest were worth R5 000 more than their proportionate share
of the fair value of the identifiable net assets of the acquiree.
9.
Assume that the identifiable asset acquired and the liabilities assumed at acquisition date are
shown at their acquisition-date fair values, as determined in terms of IFRS 3, Business
Combinations.
10.
You may ignore tax implications
*PLEASE TURN PAGE OVER FOR REQUIRED INFORMATION*
COURSE: ACCOUNTING IIB
FAO Q1-2018
- 4QUESTION 1 (CONTINUED)
REQUIRED:
1.1
Prepare the necessary pro forma consolidation journal entries relating to the intra-group
transactions ONLY for the reporting period ended 31 December 2018.
(15)
1.2
Prepare the analysis of the owner’s equity of the ordinary shares of Elsa Ltd for the reporting
period ended 31 December 2018.
(10)
1.3
Prepare the main pro-forma consolidation journals eliminating only Anna Ltd’s investment in
the ordinary shares of Elsa Ltd.
(5)
1.4
Prepare the analysis of the owner’s equity of the preference shares of Elsa Ltd for the reporting
period ended 31 December 2018.
(5)
1.5
Prepare the Consolidated Statement of Comprehensive Income of Anna Ltd and its subsidiary
for the reporting period ended 31 December 2018.
(10)
1.6
Prepare the Consolidated Statement of Changes in Equity of Anna Ltd and its subsidiary for
the reporting period ended 31 December 2018.
(10)
PLEASE NOTE: Total columns are NOT required.
___
(55)