Question
QUESTION 1: 30 MARKS Impairment to an amount in the current financial year Information 1. H Limited acquired 80 000 ordinary shares in S Limited
QUESTION 1: 30 MARKS
Impairment to an amount in the current financial year
Information
1. H Limited acquired 80 000 ordinary shares in S Limited on 1 January 20.8 for R140 000.The owners equity of S Limited at that date was as follows:
R Share capital 100 000 ordinary shares 100 000
Retained earnings 50 000
On this date the assets and liabilities were considered to be fairly valued and there were nounaccounted for contingent liabilities.
2. The retained earnings of S Limited amounted to R150 000 at 1 January 20.9.
3. At 31 December 20.9 the goodwill of S Limited had been impaired to R5 000.
4. The profit for the year of S Limited was R30 000.
5. The group applies the full goodwill method to account for goodwill.
6. The fair value of the non-controlling interest on 1 January 20.8 was R35 000.
Prepare the following:
i) The analysis of owners equity at acquisition.
ii) The pro forma consolidation journal entries for the year ended 31 December 20.9.
QUESTION 2 10 MARKS
Investor sells to associate
A Limited has a 25% interest in B Limited and has significant influence over B Limited. A Limited sold inventory to B Limited at a profit. At year end B Limited still had inventory on hand amounting to R100 000. A Ltd sells inventory to B Ltd at a profit mark-up of 20% on selling price. Assume a SA normal tax rate of 30%.
Required:
Prepare the pro forma consolidation journal entries for the above transaction.
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