IWP Ltd (The Institute for Wildlife Preservation) focusses on wildlife conservation and veterinary strategies. BigCat Ltd does research on various types of illnesses affecting wild cats. IWP Ltd acquired BigCat Ltd in order to expand on the business's capabilities. The information below represents the trial balances of IWP Ltd and its subsidiary, BigCat Ltd, as at 31 August 2022: IWP Ltd R BigCat Ltd R Share capital - ordinary shares..... (500 000) (200 000) -20% preference shares. Retained earnings-1 September 2021. (3 855 000) (90 000) (1800 000) Revaluation surplus... (200 000) Trade and other payables.. (450 000) Long-term borrowings.... (850 000) Loan from IWP Ltd.. Property, Plant and Equipment.. 5 700 000 Investment in BigCat Ltd:. -Ordinary shares (cost equals fair value). -20% Preference shares (cost equals fair value).. Loan to BigCat Ltd... Trade and other receivables. Bank. Inventory.. Sales Other income. Cost of sales.. Taxation for the year.. 1 100 000 49 500 300 000 1 136 600 (249 500) 980 000 (7 500 000) (540 000) 3 000 000 1 268 400 (350 000) (380 000) (1 000 000) (300 000) 4 300 000 930 000 (138 000) 1 000 000 (5 000 000) (398 000) 2 000 000 798 000 Interest paid.. Other expenses. Dividends paid... Additional information 90 000 120 000 420 000 410 000 100 000 98 000 1. IWP Ltd acquired interest in both the ordinary share capital and preference share capital of BigCat Ltd as part of a business combination on 1 September 2020. 2. IWP Ltd acquired 105 000 shares of the 150 000 issued ordinary shares in BigCat Ltd and 55% of preference shares. The retained earnings of BigCat Ltd amounted to R1 100 000 and the revaluation surplus amounted to R200 000 on date of acquisition. 3. The carrying amounts of all other assets and liabilities were deemed equal to their fair values on this date. Since the acquisition date, BigCat Ltd did not purchase any land or sell any of its property. It is the policy of the group to revalue land every second year. At the end of the current year, the land was revalued again. The issued share capital of both companies remained unchanged since acquisition. The preference share capital is classified as equity and no preference dividends were in arrears at acquisition date and in the year ending 2021. Assume each ordinary share carries one vote and that voting rights alone determine control. The group's policy is to disclose goodwill at cost less impairment in the consolidated financial statements. Goodwill was not impaired in the current year. 4. Since the acquisition date, IWP Ltd purchased its veterinary products from BigCat Ltd at a cost price plus 20%. On 31 August 2022 the inventory on hand in IWP Ltd's records included R350 000 of veterinary products purchased from BigCat Ltd (R400 000 31 August 2021). The intragroup sales for the year amounted to R850 000. 5. 6. 7. On 28 February 2021, IWP Ltd sold a machine to BigCat Ltd and made a profit of R60 000 on this transaction. Plant & Machinery is depreciated at 25% per annum on cost using to the straight-line method. On 1 August 2021, BigCat Ltd entered into a loan agreement with IWP Ltd. They agreed that the capital amount is only payable on 31 August 2025. According to this signed agreement, BigCat Ltd will pay 10% interest on 31 August each year. All interest that occurred during the year was paid and received on 31 August 2022. The interest received is included in other income. You may assume that profit after tax for BigCat Ltd amounts to R2 070 000 for the year. Part A Draft the following pro-forma consolidation journal entries of the IWP Ltd Group for the year ended 31 August 2022, after taking the above-mentioned information into account: (a) Elimination of the unrealised profit included in the opening and closing inventory. Marks 6 (b) Elimination of the profit on sale of the machine and the related depreciation from the date of transaction. 7% (c) Recording of the non-controlling interest's share in the current-year revaluation surplus. 2 (d) Elimination of the intragroup loans and interest thereon. 5 [21] Please note: Indicate clearly to which company each account refers. Journal narrations are not required. Show all calculations and round all amounts to the nearest Rand. Ignore the taxation effect on unrealised profits and/or losses, as well as capital gains tax. Part B Marks Prepare the consolidated statement of profit or loss and other comprehensive income for the IWP Ltd Group for the year ended 31 August 2022. 24 Please note: Your answer should comply with the requirements of International Financial Reporting Standards (IFRS). Show all calculations and round all amounts to the nearest Rand. Ignore the taxation effect of unrealised profits and/or losses, as well as capital gains tax. Notes to the consolidated statements are not required. [24]