On 1 January 2019 Detergent company acquired 75% of Latrine companys equity shares by means of an exchange of 2 shares in Detergent for every 3 shares acquired in Latrine. On that date, further consideration was also issued to the shareholders of Latrine in the form of $100 8% loan notes for every 100 shares acquired in Latrine. None of the purchase consideration nor the outstanding interest on the loan notes at 31 March 2019 has yet been recorded by Detergent. At date of acquisition the share price of Detergent and Latrines share is N$3,20 and N$1,80 respectively. The summarized statements of financial position of the two companies as at 31 March 2019 are: N$000 N$000 Assets Non-Current assets PPE (note 1) 75 200 31 500 Investment in (Amerson Ltd) (note 4) 4 500 79 700 31 500 Current assets 35 300 31 900 Inventory (note 3) 19 400 18 800 Trade receivables 14 700 12 500 bank 1 200 600 Total assets 115 000 63 400 Equity and Liabilities Equity Equity shares of $1 each 50 000 20 000 Retained earnings (01 April 2018) 20 000 19 000 (@31 March 2019) 16 000 8 000 86000 47 000 Non-Current liabilities 29 000 16 400 8 % loan notes 5 000 Nil Current liabilities 24 000 16 400 Total equity and liabilities 115 000 63 400 The following information is relevant: Note 1 At the date of acquisitionthe fair values of Latrines assets were equal to their carrying amounts. However Latrine operates amine which requires to be decommissioned in five years time. No provisions have been made for these decommissioning costs by Latrine. The present value (discount factor 8%) of the decommissioning is estimated at N$4m and will be paid five years from the date of acquisition (the end of the mines life). Note 2 Detergents policy is to value NCI at fair value at the date of acquisition. Latrines share price at that date can be deemed to be representative of the fair value of the shares held by the NCI. Note 3 The inventory of Latrine Company includes goods bought from Latrine for N$2.1m. Detergent applies a consistent mark up on sales of 40% when arriving at its selling prices. On 28 March 2019 Detergent dispatched goods to Latrine with a selling price of $700 000. These were not received by Latrine until after year end and so have not been included in the above inventory at 31 March 2019. At 31 March 2019 Detergents records showed a receivable due from Latrine of N$3m, this differed to the equivalent payable in Latrines records due to the goods in transit. Note 4 The investment in Amery Ltd represents 30% of its voting share capital and Detergent uses equity accounting to account for this investment. Amery Ltds profit for the year ended 31 March 2019 was N$6m and Amery Ltd paid a total dividend of N$2m during 31 March 2019. Detergent has recorded its share of dividend rereceived from Amery in investment income (and cash). Note 5 All profits and losses accrued evenly throughout the year Note 6 There were no impairment losses within the group for the year ended 31 March 2019. Required: 1.1 Prepare the consolidated statement of financial position as at 31 March 2019 25 QUESTION 2 Mumbai Indians Ltd (MI) specializes in providing advice to the customers on financial accounting, taxation, corporate finance and cost accounting matters. Rojaston Royals (RR) is a relevant company to the MI group. Additional information: Note 1 During 2015 MI acquired 60 000 shares in RR. At the acquisition date the retained earnings in RR amounted to N$40 000. The share capital in RR amounted to 200 000ordinary shares @ a value of N$200 000, which has not changed subsequent to acquisition date. The consideration transferred consisted of the following: Cash to the amount of N$50 000 payable immediately Transfers of one of MIs accounting software to the previous Shareholder of RR. Carrying amount N$20 000 and Fair value N$28 000 at acquisition date Transfer of the license to operate the accounting software to the value pf N$12 000 to the previous Shareholders. Transaction costs and administration costs relating to the acquisition date are N$4000 payable in cash at acquisition date. All the identifiable assets acquired and liabilities assumed of RR were shown at their acquisition date fair value and there were no unrecognized contingent liabilities. Note 2 During 2018 RR started selling inventories to MI at a profit of 30% on cost. Included in MIs inventory at 31 Dec 2018 and 31 Dec 2019 was N$150 000 AND N$80 000 respectively in respect of such inventories at cost to MI. Total sales of inventories for the year between MI and RR amounted to N$250 000. Note 3 Assume a tax rate of 25.75% Note 4 Investments in shares in the separate financial statements of MI are carried at cost. Note 5 The following information pertains to both MI &RR Retained earnings/losses balance MI RR 01 Jan 2016 150 000 46 000 01 Jan 2017 100 000 51 000 01 Jan 2018 120 000 63 000 Retained earnings opening(01-01-17) 150 000 80 000 Profit for the period 100 000 40 000 Dividend paid (40 0000 (10 000) Retained earnings closing (31-12-19) 210 000 110 000 Required: 2.1 Provide all proforma Journal entries to prepare the Consolidated annul financial statements of the MI group for year ended 31 Dec 2019 15 2.2 Calculate the amount at which the investment in associate should appear in the Consolidated statement of financial position at 31 Dec 2019. 5 Journal entries should be prepared as far as the information permits