QUESTION 2 (45 Marks) A Ltd acquired 30% interest in B Ltd for NS300 000 on incorporation of B Ltd (3 January 2019). In terms of a contractual agreement A Ltd, together with other operators, exercises joint control over the economic activities of B Ltd. The contractual agreement specifies that all revenues, expenses, assets and liabilities are allocated according to the respective interests held by the operators. The arrangement is classified as a joint operation as per the requirements of IFRS 11, Joint Arrangements. Here follow extracts of the financial statements of A Ltd Group and B Ltd for the year ended 31 December 2019: Consolidated Statement of Financial Position as at 31 December 2019 A Ltd Group B Ltd 650 000 Assets Property plant and equipment Investment in B Ltd at cost Inventory 1 200 000 300 000 200 000 1 700 000 800 000 1 450 000 Equity and Liabilities Share capital Retained earnings Non-Controlling Interest 1 000 000 450 000 500 000 800 000 400 000 1 700 000 1 450 000 Consolidated Statement of Profit or Loss and Other Comprehensive Income for year ended 31 December 2019 Revenue Cost of goods sold Gross profit Other income Other expenses Profit before tax Income tax expense Profit for the year Other comprehensive income Total comprehensive income Total comprehensive income attributable to: Owners of the parent 2 500 000 (1 400 000) 1 100 000 534 000 (120 000) 1 514 000 (480 000) 1 034 000 1 800 000 (1 100 000 700 000 325 000 (125 0000 900 000 (270 000) 630 000 1 034 000 630 000 770 000 630 000 Page 3 of 4 Non-Controlling Interest 264 000 1 034 000 630 000 Extract Consolidate Statement of Changes in Equity for year ended 31 December 2019 A Ltd Group B Ltd Retained Retained earnings earnings Balance as at 1 Jan 2019 150 000 Changes in equity Total comprehensive income: Profit for the year 770 000 630 000 Dividend paid (120 000) (180 000) Balance as at 31 December 2019 800 000 450 000 Note 1: On 1 March 2019, A Ltd Group sold land to the joint operation, B Ltd, at its fair value of N$350 000. The land had a carrying amount of N$120 000 in the records of A Ltd Group. Note 2: On 1 October 2019, B Ltd sold plant to A Ltd Group at a profit of N$120 000. It is the entity's policy to depreciate plant using the straight-line method. At the date of sale, the remaining useful life of the plant is 5 years, which is consistent with the tax allowance of the South African Revenue Service. The profit on sale of the plant is included in other income in the records of B Ltd. Note 3: Assume a normal tax rate of 28%. Required: 2.1 Prepare Journal entries to account for joint operations in A Ltd Group's financial 15 statements for the year ended 31 December 2019 2.2 Prepare ONLY the asset section of the Consolidated Statement of Financial 15 Position as at 31 December 2019 2.3 Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive 15 Income for year ended 31 December 2019
