ICE Task 1 (15 marks)

King Ltd and Queen Ltd are both computer software developers. The companies are situated in South Africa. On 1 March 2020, King Ltd acquired 80% of the shares in Queen Ltd. The financial year end of both companies is 28 February. Below is an extract from the trial balances of the companies on 28 February 2022:

Debits

Property, plant and equipment Investment in Queen Ltd Ordinary shares at cost Inventory Trade and other receivables Bank Finance costs Cost of sales Other expenses Income tax expense

Credits

Share capital ordinary shares (100 000; 75 000 shares) Retained earnings 1 March 2021 Other components of equity

Long-term loan Trade and other payables Revenue Other income

Additional information:

King Ltd Queen Ltd RR

2 050 000 1 000 000

500 000 550 000 184 600 111 200

1 400 000 350 000 526 064

6 671 864

200 000

1 500 000 81 864 750 000 400 000 3 500 000 240 000 6 671 864

2 150 000 -

340 000 450 000 319 400

- 1 000 000 235 000 403 200 4 897 600

150 000

1 350 000 47 600 400 000 275 000 2 500 000 175 000 4 897 600

1. On the date of acquisition, the carrying amount of Queen Ltd.s assets and liabilities were deemed to be equal to the fair value thereof. Each share of Queen Ltd carries one vote and voting rights alone determine control. On the acquisition date, Queen Ltd.s equity consisted of:

Share capital ordinary shares Retained earnings Other components of equity

R

150 000 850 000 47 600

The King Ltd group elected to use the partial method to recognise goodwill. The non- controlling interests are measured at their proportionate share of net assets at acquisition. The issued share capital of

both companies has not changed since incorporation.

Both companies bank at Royal Bank. King Ltd and Queen Ltd did not guarantee overdraft bank accounts to one another should one of them default.

The intragroup loan was included in trade and other receivables and trade and other payables respectively. The loan amounts to R100 000. Queen Ltd granted the loan to King Ltd. The loan is payable in the next twelve (12) months and therefore classified as trade and other receivables and payables respectively.

Assume that the profit after tax for the current financial year amounts to R1 036 800 for Queen Ltd.

Required:

what is the share capital?