Question
QUESTION 1 30 MARKS The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd: Statement of financial position as
QUESTION 1 30 MARKS
The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd:
| Statement of financial position as at 31 December 2018 | ||||||
| Mega Ltd | Ultra Ltd | |||||
| ASSETS |
|
| ||||
| Property, plant and equipment | 270 000 | 340 000 | ||||
| Investment in Ultra Ltd: 48 000 shares at fair value | 350 000 | - | ||||
| (cost: N$ 330 000) |
|
| ||||
| Trade receivables | 80 000 | 23 500 | ||||
| Inventories | 350 000 | 218 000 | ||||
| Bank | 65 000 | - | ||||
|
|
| |||||
| Total assets | 1 115 000 | 581 500 | ||||
| EQUITY AND LIABILITIES | ||||||
| Share capital | 400 000 | 240 000 | ||||
| Mark-to-market reserve | 20 000 | 10 000 | ||||
| Retained earnings | 375 000 | 240 000 | ||||
| Long-term borrowings | 43 000 | 21 000 | ||||
| Trade and other payables | 277 000 | 23 500 | ||||
| Bank overdraft | - | 47 000 | ||||
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|
| |||||
| Total equity and liabilities | 1 115 000 | 581 500 | ||||
| Statement of profit or loss and other comprehensive income for the year ended | ||||||
| 31 December 2018 | ||||||
| Mega Ltd | Ultra Ltd | |||||
| Revenue | 927 000 | 1 628 000 | ||||
| Cost of sales | -472 000 | -725 000 | ||||
| Gross profit | 455 000 | 903 000 | ||||
| Other expenses | -287 100 | -472 000 | ||||
| Dividend received from Ultra Ltd | 94 000 | - | ||||
| Profit before tax | 261 900 | 431 000 | ||||
| Income tax expense | -198 000 | -128 000 | ||||
| Profit for the year | 63 900 | 303 000 | ||||
| Other comprehensive income | ||||||
| Items that will not be reclassified to profit or loss | ||||||
| Mark-to-market reserve | 4 000 | 1 000 | ||||
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 67 900 | 304 000 | ||||
| Extract from the Statement of changes in equity for the year ended 31 December 2018 | ||||
| Mark-to-market reserve | Retained earnings | |||
| Mega Ltd | Ultra Ltd | Mega Ltd | Ultra Ltd | |
| Balance at 1 Jan 2018 | 15 000 | 8 000 | 215 000 | 170 000 |
| Changes in equity for 2018 |
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| Total comprehensive income for the year: |
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|
|
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| Profit for the year |
|
| 63 900 | 303 000 |
| Other comprehensive income for the year | 4 000 | 1 000 |
|
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| Dividends |
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| -108 000 | -120 000 |
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|
|
|
| |
| Balance at 31 December 2018 | 19 000 | 9 000 | 170 900 | 353 000 |
Additional information:
On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of:
Share capital N$ 260 000
Mark-to-market reserve N$ 3 000
Revaluation reserve N$ 7 000
Retained earnings N$ 135 000
Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interests share was N$8,50 per share, based on market prices.
Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications.
REQUIRED
Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks
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Financial Accounting
Authors: Kermit D. Larson, Paul B. W. Miller
5th Edition
0256091935, 978-0256091939
