QUESTION 2 (IAS 28 &IFRS 3) (10)

Ramon Ltd invested in the equity of Amani Ltd a number of years ago. The payment for the 30% investment in the equity of Amani Ltd was agreed at $500 000. Ramon Ltd can appoint 2 out of 5 directors of Amanis Board of Directors and accounts for the investments in its consolidated financial statements in terms of the equity method. Ramon Ltd also owns a controlling interest in various other subsidiaries. Information on Amani: 1. On 1 January 2013 (the date on which the 30% interest was acquired), Ramon Ltd agreed to settle the consideration payable for the investment in Amani Ltd in 5 equal instalments after the acquisition date. The purchase agreement for the investment in Amani Ltd however stated that no interest would be payable on the outstanding amount. The market related rate of interest is 10% p.a., nominal and pre-tax of Amani Ltd has remained unchanged since acquisition of the interest by the Holding entity. 2. On 1 July 2013 Amani Ltd sold depreciable property to Ramon Ltd at an inter-company profit of $900 000. The tax consequences of the sale of property for Amani Ltd were a recoupment of $200 000 and a capital gains above base cost of $300 000. The tax rate Page 12 of 19 throughout the period remained constant at 25,75% and capital gains levied at 20% of the claim on 1 July 2013 the date of inter-entity sale of property plant and equipment. The property had a remaining useful life of 10 years. Ramon Ltd sold the depreciable property to an independent 3rd part on 31 December 2017. 3. Ramon Ltd correctly accounted for the sale of the property and its tax consequences in its separate financial statements for the year ended 31 Dec 2017. 4. The trial balance of Amani Ltd on 31/12/17 was as follows: Property plant and equipment 1 200 000 Inventory 1 000 000 Cash and cash equivalence 600 000 Share capital 300 000 Retained earnings (01/01/12) 700 000 revenue 800 000 Cost of sales 300 000 Operating expenses 150 000 Income tax expenses 50 000 Inter-entity loan 1 500 000 Required: Provide all necessary proforma journal entries to equity account Amani Ltd in the consolidated annual financial statements of the Ramon Ltd group of companies for the year ended 31/12/17 indicate all calculations clearly. (10)

financial accounting