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on 1 January 2 0 2 1 , Kumusha Ltd acquired 3 5 % of the issued shares of Bamboo Ltd for R 1 8
on January Kumusha Ltd acquired of the issued shares of Bamboo Ltd for
R Kumusha Ltd exercised joint control over the financial and operating policy
decisions of Bamboo Ltd since January The arrangement was classified as a joint
venture in accordance with IFRS Joint Arrangements The financial accountant of the
group prepared the following section of the analysis of owners equity in Bamboo Ltd which
you may assume is correct:
Total At
At acquisition January
Share capital
Retained earnings
Marktomarket reserve
Equity represented by gain on bargain purchase
Investment in Bamboo Ltd at cost price
At acquisition date there were no unidentified assets or liabilities and the fair value of the
identifiable assets and liabilities of Bamboo Ltd were considered to be equal to the carrying
amounts thereof. The following is an extract from the trial balance of Bamboo Ltd for the
year ended December :
DrCr
Share capital ordinary shares
Retained earnings January
Marktomarket reserve January
Deferred tax on marktomarket reserve
Accumulated depreciation
Trade and other payables
Revenue
Other income
Other comprehensive income marktomarket reserve after tax
Property, plant and equipment Investments in equity instruments:
Investment in Brush Ltd at fair value
Investment in Feathers Ltd at fair value
Trade receivables
Cash and cash equivalents
Inventory
Dividends paid December
Cost of sales
Other expenses
Income tax expense
Additional information
During the current year Kumusha Ltd started selling inventory to Bamboo Ltd at a
markup on the selling price. On December Bamboo Ltd had inventory
amounting to R on hand which was purchased from Kumusha Ltd
On December the investment in Bamboo Ltd was recorded at a fair value
of R in the financial records of Kumusha Ltd
Joint ventures are accounted for using the equity method.
The group measures its investments in equity instruments at fair value through other
comprehensive income. The fair value of all equity instruments is equal to the cost thereof,
unless otherwise stated.
The SA normal tax rate is and capital gains tax is calculated at thereof.
You may assume that the tax rate and the capital gains tax rate has remained unchanged since
January
Each share carries one vote.
required
Prepare the proforma journal entries to account for the joint venture in the financial
statements of the Kumusha Ltd Group for the year ended December
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