QUESTION 12 (31 marks)(37 minutes) The following are the trial balances of Pan Limited Group San Limited for the year ended 31 December 20.3: Debits Property, plant and equipment Investment in San Limited at fair value Other investments Loan to San Limited Trade receivables Interest paid Income tax expense Dividend paid-31 December 20.3 Credits Share capital - R2 ordinary shares Share premium Retained earnings - 31 December 20.2 Mark-to-market reserve Long-term liability Long-term liability - Pan Limited Deferred tax Trade and other payables Payable to Pan Limited Gross profit Dividend received Additional information Pan Limited R San Limited R 963 000 1 069 000 431 250 118 000 120 000 142 650 187 220 10.000 18 000 229 100 197 780 80 000 2 094 000 500 000 610 000 25 000 1 497 000 220 000 65 000 350 000 8 600 140 000 110 000 1 400 16 250 24 000 800 000 28 000 700 000 17 750 2 094 000 1 497 000 1. Pan Limited acquired 60% of the share capital of San Limited on 1 February 20.2. The following information is relevant to the acquisition: At that date a portion of land that was stated in the records of San Limited at R400 000 was revalued by a sworn appraiser by 25% more. The revaluation was not recorded in the records of San Limited. This is the only item of San Limited of which the fair value is not equal to its carrying amount at the date of acquisition. The retained earnings at the date of acquisition were R410 000. There were no other reserves. 2. Pan Limited made no adjustment to the fair value of the available-for-sale investment in San Limited for the year ended 31 December 20.3. QUESTION 12 (continued) 3. On 30 June 20.3 San Limited had a rights issue of 1 share for every 10 shares held at a price of R8.50 per share. The holding company took up only 500 of its rights and the minority shareholders took up 9 500. The operating profit of San Limited was earned evenly throughout the current year. 4. Pan Limited made a long-term loan to San Limited on 1 January 20.3. The loan is repayable in annual instalments of R10 000 on 31 December of each year. The interest of 15% per annum is also payable on 31 December. 5. The group uses the proportionate method to recognise goodwill. Goodwill was not considered to be impaired at the end of the current financial year. 6. The SA normal tax rate is 28%. You may assume the tax rate has been 28% since 1 February 20.2. 7. All shares carry one vote. REQUIRED (a) Prepare the consolidation journals for the year ended 31 December 20.3. (b) Prepare the consolidated annual financial statements of the Pan Limited Group for the year ended 31 December 20.3. Your answer must comply with the requirements of the Companies Act, 1973 and Generally Accepted Accounting Practice. Notes to the consolidated annual financial statements and comparative amounts are not required. Calculations are to be done to the nearest Rand. (31) (October 2004 exam - Adapted)