QUESTION 1 (100 marks)

The following represents the trial balances of Orchid Ltd and its subsidiary, Rose Ltd, for the financial year ended 30 June 2023:

	Orchid Ltd R Dr/(Cr)	Rose Ltd R Dr/(Cr)
Share capital (Orchid Ltd 200 000 shares; Rose Ltd 100 000 shares)	(200 000)	(100 000)
Retained earnings (1 July 2022)	(528 840)	(378 650)
Equity investments:
- Investment in Rose Ltd at cost price	390 000	-
- Investment in Petal Ltd at cost price	-	25 000
Loan to Orchid Ltd	-	250 000
Revenue	(733 200)	(600 220)
Dividends received	(6 800)	(2 000)
Interest received	-	(25 000)
Gain on sale of land	-	(55 000)
Cost of sales	355 000	300 110
Other expenses	120 000	115 000
Interest paid	30 350	-
Income tax expense	59 950	13 505
Dividends paid 30 June 2023	17 000	8 500
Property, plant, and equipment	655 000	275 000
Accumulated depreciation	(55 000)	(35 000)
Trade receivables	21 000	89 000
Inventories	90 540	63 755
Cash and cash equivalents	105 000	56 000
Long-term loan: Petal Ltd	(70 000)	-
Long-term loan: Rose Ltd	(250 000)	-

Additional information:

Orchid Ltd purchased an 80% interest in Rose Ltd on 1 July 2021 when the retained earnings of Rose Ltd amounted to R400 000. On 1 July 2021, the assets and liabilities of Rose Ltd were fairly valued except for:

	Fair value	Carrying value
Land	190 000	140 000
Plant	58 000	50 000

Rose Ltd sold the land during the 2023 financial year.

Rose Ltd depreciates plant at 20% per annum on the straight-line basis. The remaining useful life of the plant at the acquisition date of Rose Ltd was four years.

Orchid Ltd started purchasing inventory from Rose Ltd during the 2023 financial year. The inventory is purchased at a profit markup of 20% on the cost price of the items. Included in Orchid Ltd.s inventory at 30 June 2023 is inventory of R40 000 purchased from Rose Ltd. The total sales from Rose Ltd to Orchid Ltd during the current financial year amounted to R200 000.

The total amount of interest received by Rose Ltd is in respect of the intragroup loan.

Orchid Ltd accounts for investments in subsidiaries at cost in its separate financial statements.

Orchid Ltd elected to measure the non-controlling interests in the acquiree at their proportionate share of the acquirees identifiable net assets at the acquisition date.

Assume a company tax rate of 28% and a Capital Gains Tax inclusion rate of 80%. Ignore Value Added Tax (VAT) and Dividend Tax.

REQUIRED:

1.1 Prepare all the pro forma journal entries required to prepare the consolidated financial statements of the Orchid Ltd Group for the financial year ending 30 June 2023. Please add journal narrations. (50 marks)

1.2 Prepare the Consolidated Statement of Changes in Equity of the Orchid Ltd Group for the financial year ending 30 June 2023. (21 marks)

1.3 Prepare the Consolidated Statement of Financial Position of the Orchid Ltd Group for the financial year ending 30 June 2023. (29 marks) Note:

All amounts should be rounded to the nearest Rand. Show all workings clearly.

Your answer must comply with International Financial Reporting Standards (IFRS).