Question 1 A Ltd. was incorporated with a capital of R200 000, composed of 200 000 ordinary shares of R1 each A Ltd. purchased the total issued capital of B Ltd. from the existing shareholders on 1 January 1985. The capital of B Ltd was 100 000 shares of R1 each. The balance sheet of B Ltd. at 1 January 1985 was as follows: BLTD. Liabilities Assets Share capital Fored property authorised and issued Other assets 100 000 shares of R1 100 000 Unappropriated profits 30 000 Creditors 04.000 224 R R 200 000 2 400 each 224.00 The purchase price was R200 000. This was satisfied by the issue of 160 000 shares of A Ltd. priced at a premium of 25 cents per share. A Ltd. valued the fixed property of B Ltd. at R270 000 in wriving at this purchase price, but the book value was not adjusted in B's books. B Ltd. continued to trade as a subsidiary of A Ltd. The profits of B Ltd. for year ended 30 June 1985 were R37 000. A dividend of R30 000 was declared out of these profits and paid in July 1985 B Ltd. sold the fixed property on 1 July 1985 for R250 000 The profits of B Ltd. for the year ended 30 June 1986 amounted to R20 000. This amount plus the profit on the sale of the property was declared as a dividend on 30 June 1986 and paid in July 1986. You are required: (a) to show by journal entries in the books of A Ltd.: i the purchase of the shares in B Ltd.; . the receipts of dividends from A Ltd.; and m. any other adjustment which you consider advisable assume that profits have been earned evenly throughout the period); and (b) to show the balance sheet of A Ltd. at 30 June 1986. (20)