QUESTION 1 (100 marks) The following trial balances were obtained from the financial records of Flix Ltd (Flix) and Toons Ltd (Toons) for the financial year ended 31 December 2021: On 1 January 2019, Flix acquired 30% of the ordinary share capital of Toons for R70 000 and thereby obtained significant influence over Toons on that date. The share capital of Toons on 1 January 2019 was R100 000 and retained earnings was R120 000. All of Toons assets and liabilities were considered to be fairly valued on this date. Final Trial balances Flix Ltd R Toons Ltd R DR CR DR CR Ordinary Share capital (R1 each) 2 000 000 100 000 Retained earnings: 1 January 2021 251 392 233 882 Ordinary dividends declared - 100 000 Trade and other payables 275 000 130 000 Debentures 94 878 Shareholders for dividends ordinary - 100 000 Property, plant, and equipment 615 700 760 220 Trade and other receivables (including debentures in Flix) 395 000 302 018 Investments (including investment in Toons) 2 766 510 - Revenue 2 750 000 1 200 000 Other income 125 000 45 058 Other expenses 1 258 714 412 508 Finance costs (including the interest on debentures) 10 036 1 500 Income tax expense 450 310 232 694 5 496 270 5 496 270 1 808 940 1 808 940 ANNEXURE I: FORMATIVE ASSESSMENT 2 100 HFAC333-1-July-Dec2022-FA2-SK-V3-29062022 On 30 June 2021, Flix acquired another 30% of the ordinary share capital of Toons for R250 000 and thereby obtained control over Toons. All of Toons assets and liabilities were considered to be fairly valued on the acquisition date except for an item of property, plant and equipment (PPE) which was considered to be R200 000 more than the carrying value on 30 June 2021. The item of PPE had a remaining useful life of 4 years from 30 June 2021 and a zero residual value. On 30 June 2021, the fair value of Flixs previously held equity interest in Toons was R250 395. Flix elected to measure the non-controlling interest at its proportionate share of Toons identifiable net assets at the acquisition date. Toons Ltd declared a dividend to all shareholders at 15 December 2021. This was the only dividend declaration made during the year. The dividends were still outstanding at year end. The amount receivable by Flix is included in trade and other receivables. Intragroup transactions: On 1 July 2021, Flix issued 10 000 debentures of R10 each. The debentures pay a 5% coupon annually in arrears and are redeemable at a premium of 15% in 5 years time. The current market rate for a similar debt instrument is 10%. Toons took up 5 000 of these debentures. Debentures in Flix is included in trade and other receivables in the books of Toons. The interest earned by Toons on these debentures is included in Toons other income. Other information: Toons' profit was earned evenly throughout the financial year except for the effects of the intercompany transactions regarding debentures that took place during the financial year (see intragroup transactions above). Flix measures the investment in Toons at cost in accordance with IAS27.10 in its separate financial statements. All companies in the Flix Ltd Group have a 31 December financial year end. Assume an income tax rate of 28% for all periods and 80% of capital gains are included in taxable income. Ignore the effects of Dividend Tax and Value Added Tax (VAT). ANNEXURE I: FORMATIVE ASSESSMENT 2 101 HFAC333-1-July-Dec2022-FA2-SK-V3-29062022 REQUIRED: 1.1 Prepare all the pro forma journal entries for the Flix Group Ltd for the financial year ended 31 December 2021. Show all your workings as marks are allocated for calculations. (85 Marks) 1.2 Prepare the Consolidated Statement of Profit and Loss and Other Comprehensive Income for the Flix Group for the financial year ended 31 December 2021. (15 Marks)