Gadget Ltd (Gadget) is a local company listed on the Johannesburg Stock Exchange that invests in technology related businesses to grow and diversify its operations.

Gadget currently has two investments, an investment in Widget Ltd (Widget) and Afritech Ltd (Afritech).

The following trial balances were obtained from the financial records of Gadget, Widget and Afritech for the financial year ended 28 February 2023:

Final Closed Off Trial balances:

Gadget Ltd (R)

Ordinary share capital (R1 each for all entities) 2 000 000

Retained earnings 865 080

Trade and other payables 510 000

Deferred tax liability 31 920

Shareholders for dividends - ordinary 200 000

Property, plant and equipment (carrying value) 1 471 000

Investment in Widget Ltd 945 000

Investment in Afritech Ltd 248 000

Trade and other receivables 200 250

Bank 402 000

Total 3 607 000

Widget Ltd (R)

Ordinary share capital (R1 each for all entities) 1 000 000

Retained earnings 356 250

Trade and other payables 225 000

Deferred tax liability 7 000

Shareholders for dividends - ordinary 120 000

Property, plant and equipment (carrying value) 1 250 000

Registered Patent (carrying value) 91 000

Trade and other receivables 200 250

Bank 167 000

Total 1 708 250

Afritech Ltd (R)

Ordinary share capital (R1 each for all entities) 500000

Retained earnings 215000

Trade and other payables 45000

Shareholders for dividends - ordinary 200 000 120 000

Property, plant and equipment (carrying value) 483000

Trade and other receivables 28000

Bank 249000

Total 760 000

Notes:

1. On 1 March 2022, Gadget acquired 60% of the ordinary share capital of Widget for R945 000 from another third party entity and thereby obtained control over Widget. Widgets retained earnings on 1 March 2022 was R319 500 and the ordinary share capital at acquisition date was R1 000 000. On 1 March 2022, the market value of Widgets shares in issue was R1.50 per share. At acquisition date, all the assets and liabilities of Widget were considered to be fairly valued except for a registered patent which had a carrying value of R98 000 and a remaining useful life of 14 years from 1 March 2022. The fair value of the registered patent on 1 March 2022 date was R126 000. It is Widgets accounting policy to depreciate patents using the straight-line method based on the useful life. The tax base of the registered patent equals its carrying value at acquisition date. The South African Revenue Service (SARS) also allows the same annual allowance i.e. R7 000 p.a. with regards to the registered patent.

2. On 1 June 2022, Gadget sold equipment with a carrying value of R90 000 to Widget for R110 000. On this date, the remaining useful life of the equipment was 4 years. It is Gadgets and Widgets accounting policy to depreciate all equipment on a straight-line basis, based on the assets useful life which is in line with (the same as) the SARSs write-off periods. On 28 February 2023, 50% of the selling price was still outstanding. The outstanding amount is included as part of Trade and other Receivables of Gadget and Trade and other Payables of Widget.

3. On 1 July 2022, Gadget acquired 40% of the issued share capital of Afritech for R248 000 when the retained earnings of Afritech was R120 000. At acquisition date, the identifiable net assets of Afritech were considered to be fairly valued and equal to the carrying amount thereof. In terms of a contractual agreement, Gadget, together with other operators exercise joint control over Afritech. This arrangement was therefore classified as a joint operation as per IFRS 11 (Joint Arrangements). The contractual arrangement specifies that all the revenue, expenses, assets and liabilities are allocated according to the respective ownership interest held by the joint operators in Afritech. The ordinary share capital of Afritech remained the same throughout the financial year.

4. Dividends were declared on 28 February 2023 by both Gadget and Widget. All dividends were still outstanding at the current financial year end. The trade and other receivables of Gadget includes ordinary dividends receivable from Widget.

5. Goodwill is tested annually for impairment. It was determined that the goodwill relating to the investment of Widget was impaired by R25 340 on 28 February 2023.

Additional information:

All the entities mentioned above have a 28 February financial year end.

Gadget accounts for investments in subsidiaries at cost in accordance with IAS 27.10(a) in its separate financial statements.

Gadget elected to measure the non-controlling interest in Widget at fair value (full goodwill method) at acquisition date.

Assume an Income Tax rate of 28% and a Capital Gains Tax inclusion rate of 80%.

Ignore the effects of Dividends Tax and Value Added Tax (VAT).

REQUIRED: Prepare only the Assets and Liabilities sections (in other words, ignore the equity section) of the Consolidated Statement of Financial Position of the Gadget Ltd Group as at 28 February 2023. Include all totals and sub-totals.

Show and reference all your workings and calculations clearly.

Comparative figures are not required.

Notes to the financial statements are not required. (43 marks)