30 MARKS QUESTION 1 The following abridged financial statements of two companies are presented to you STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 General reserve NS Retained earnings NS Total NS Lionel Ltd Balance 31/12/2020 20 000 LIONEL LTD VENTURE LTD Profit for the year 100 000 160 000 125 000 100.000 NS NS Transfer to general reserve 60.000 (60 000) ASSETS Non-current assets at carrying values Dividends declared (10 000) 970 000 Property, plant and equipment 410 000 350 000 350 000 Balance 31/12/2021 80 000 120 000 (60 000) 200 000 Investment in Venture Ltd (160 000 shares @cost) 560 000 340 000 520 000 Venture Ltd Balance 31/12/2020 Profit for the year Current assets 174 000 312.000 Inventory at cost 166 000 Debtors 1 310 000 208.000 870 000 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 80 000 100 000 70 000 180 000 70.009 Transfer to general reserve Balance 31/12/2021 20 000 100 000 (20 000) 150 000 250 000 Additional Information: EQUITY AND LIABILITIES Share capital and reserves General reserve 1 000 000 650 000 Share capital-ordinary shares of N$2.00 each 800 000 400 000 80 000 100 000 Retained earnings Non-current liabilities Interest bearing loans Other non-current liabilities Current liabilities Creditors Inland Revenue 120 000 150 000 150 000 20 000 100 000 20 000 50 000 160 000 96 000 64.000 200 000 138.000 62 000 1 310 000 870 000 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 LIONEL LTD VENTURE LTD N$ Sales Cost of sales Gross Profit 800 000 (340 000) N$ 485 000 (275 000) 460 000 Total overhead expenses Salaries and wages 160 000 70 000 Depreciation Vehicles 68 572 30 000 Profit before taxation 231 428 110 000 Taxation (71 428) (40 000) Profit for the year 160 000 70 000 210 000 Lionel Ltd ("Lionel") acquired the interest in Venture Ltd ("Venture") on 31 December 2018 when the general reserve and retained earnings of Venture were NS 40 000 and NS 80 000 respectively. The group has elected to use the proportionate method to value the NCI holding at acquisition date With the exception of property, plant and equipment (which was valued at NS 300 000), all the identifiable assets of Venture were fairly valued in its books at the date of acquisition. From 1 January 2010, Lionel started buying goods from Venture. Venture sold the goods at a markup of 25% on cost to Lionel. The total sales by Venture to Lionel for the year amounted to N$ 180 000. On 31 December 2021 Lionel had inventory of N$ 12 500 on hand that they purchased from Venture. On 1 July 2021 Lionel bought a delivery vehicle from Venture for N$ 50 000. The carrying value of the vehicle in the books of Venture amounted to N$ 45 000. Both companies depreciate vehicles at 20% per annum on a straight line basis with a residual value of N$ nil. Please note that you should use the income tax figures indicated above and don't recalculate the income tax expense. Required: a) Prepare the pro-forma journals of the consolidated financial statements of Lionel Ltd and its subsidiary for the year ending 31 December 2021. Journal narrations are not required. (12) b) Prepare the equity and liabilities portion of the consolidated statement of financial position of Lionel Ltd and its subsidiary as at 31 December 2021. (18) Show all your workings. AFE 3782-Test 2/3 3/3 CAS