Black Ltd ("Black"), a sports goods manufacturer has one subsidiary, Coffee Ltd ("Coffee) which it acquired on 1 January 20.3. The following are the trial balances of Black and Coffee at 31 December 20.7: Black Ltd R Coffee Ltd R 300 000 Credits Ordinary share capital Cumulative 10% preference share capital Retained earnings - 31 December 20.6 Deferred taxation Long-term borrowings Operating profit Investment income - interest and dividends 211 600 18 400 80 000 130 000 27 000 767 000 200 000 50 000 180 000 24 000 60 000 160 000 674 000 192 000 272 000 Debits Property, plant & equipment - carrying amount Investment in Coffee 160 000 Ordinary shares, at cost 7500 Preference shares, at cost 15% Loan receivable Other investments Current assets Interest expenses Taxation expense Dividends paid Ordinary Preference 198 000 15 000 20 000 60 000 177 640 18 600 45 760 306 700 10 500 59 800 40 000 20 000 5 000 674 000 767 000 Additional Information 1. On 1 January 20.3, Black acquired 80% of the 200 000 issued ordinary shares and 30% of the preference shares in Coffee. The only reserve of Coffee at this date was retained earnings amounting to R20 000. At the date of acquisition, the only asset of Coffee that was not fairly valued was inventory which was considered to be worth R8 000 more than carrying amount. This inventory was all sold within one year. 2. On 30 June 20.5, Coffee sold an item of plant to Black for R60 000. The plant had a carrying amount of R48 000 in Coffee's accounting records immediately before the sale. The remaining life of the plant from the date of sale was considered to be 4 years. This does not represent a change in estimated life. 3. During late 20.6, Black sold inventory to Coffee. The inventory on hand as at 31 December 20.6 was R144 000. The selling price was made at a mark-up of 20%. This has been the only sale of inventory between the two companies. At 31 December 20.6, Coffee had sold 10% of the inventory and by 31 December 20.7, 80% (in total) had been sold. 4. Black advanced the loan of R20 000 to Coffee on 30 June 20.4. The loan is repayable during 20.10. 5. Black initially measured the non-controlling interest in Coffee at their proportionate share of the fair value of the identifiable net assets at acquisition. 6. Assume a tax rate of 40%. 7. The preference shares are classified as equity instruments. REQUIRED Show all workings. Round off to the nearest rand. Marks Prepare the analysis of equity worksheet of Coffee Ltd as at 31 December 20.7 using the information provided. 17.5 Black Ltd ("Black"), a sports goods manufacturer has one subsidiary, Coffee Ltd ("Coffee) which it acquired on 1 January 20.3. The following are the trial balances of Black and Coffee at 31 December 20.7: Black Ltd R Coffee Ltd R 300 000 Credits Ordinary share capital Cumulative 10% preference share capital Retained earnings - 31 December 20.6 Deferred taxation Long-term borrowings Operating profit Investment income - interest and dividends 211 600 18 400 80 000 130 000 27 000 767 000 200 000 50 000 180 000 24 000 60 000 160 000 674 000 192 000 272 000 Debits Property, plant & equipment - carrying amount Investment in Coffee 160 000 Ordinary shares, at cost 7500 Preference shares, at cost 15% Loan receivable Other investments Current assets Interest expenses Taxation expense Dividends paid Ordinary Preference 198 000 15 000 20 000 60 000 177 640 18 600 45 760 306 700 10 500 59 800 40 000 20 000 5 000 674 000 767 000 Additional Information 1. On 1 January 20.3, Black acquired 80% of the 200 000 issued ordinary shares and 30% of the preference shares in Coffee. The only reserve of Coffee at this date was retained earnings amounting to R20 000. At the date of acquisition, the only asset of Coffee that was not fairly valued was inventory which was considered to be worth R8 000 more than carrying amount. This inventory was all sold within one year. 2. On 30 June 20.5, Coffee sold an item of plant to Black for R60 000. The plant had a carrying amount of R48 000 in Coffee's accounting records immediately before the sale. The remaining life of the plant from the date of sale was considered to be 4 years. This does not represent a change in estimated life. 3. During late 20.6, Black sold inventory to Coffee. The inventory on hand as at 31 December 20.6 was R144 000. The selling price was made at a mark-up of 20%. This has been the only sale of inventory between the two companies. At 31 December 20.6, Coffee had sold 10% of the inventory and by 31 December 20.7, 80% (in total) had been sold. 4. Black advanced the loan of R20 000 to Coffee on 30 June 20.4. The loan is repayable during 20.10. 5. Black initially measured the non-controlling interest in Coffee at their proportionate share of the fair value of the identifiable net assets at acquisition. 6. Assume a tax rate of 40%. 7. The preference shares are classified as equity instruments. REQUIRED Show all workings. Round off to the nearest rand. Marks Prepare the analysis of equity worksheet of Coffee Ltd as at 31 December 20.7 using the information provided. 17.5