Question $425$ Marks

The following are the summarised balance sheets of Snow Ltd$.$ at $30$ September, years $12$ and $13$:

Year $12$

Year $13$

Year $12$

Year $13$

Share capital: R$1$ ordinary shares

$50000$

$50000$

Fixed assets $($other than goodwill$)$

$20000$

$21300$

Non$-$distributable

reserve

$18000$

$18000$

Current assets, less

current liabilities

$65250$

$70200$

Taxation $$ accounting years to $30$

September, years $12$

and $13$

Current account $$ Hail Ltd$.$

$2750$

$4750$

$6000$

Income statement

$12500$

$20250$

R$85250$

R$94250$

R$85250$

R$94250$

On $1$ October year $12,$ Hail Ltd$.$ acquired the entire share capital of Snow Ltd$.$ for a cash payment of R$30000$ and the issue of $4000$ shares of R$1$ each at a premium of $25$ cents per share.

The following occurred during the year ended $30$ September, year $13$:

$1.$Hail Ltd$.$ invoiced goods to Snow Ltd$.$ at cost plus $20\%$ and at the year$-$end R$3600$of these goods remained unsold.

$2.$Snow Ltd$.$ made a profit of R$13750$ before charging taxation.

$3.$At $30$ September, year $12,$ Snow Ltd$.$ made a provision for taxation of R$4750$ forthe accounting year to $30$ September, year $12,$ and at $30$ September, year $13,$ ataxation provision of R$6000$ for the accounting year to $30$ September, year $13.$

In determining the price of the shares of Snow Ltd$.$ at $30$ September, year $12,$ it was agreed to revalue at R$15000$ the factory standing in the books at R$12500,$ and at R$10000$ plant having a book value of R$7500,$ but the new values were not recorded in the books. Snow Ltd$.$ provided for R$1500(20\%)$ depreciation on this plant in the year to $30$ September, year $13.$

On $30$ September, year $13,$ stock valued at R$1500$ was in transit from Hail Ltd$.$ to Snow Ltd$.,$ which did not record it in its books until $4$ October, year $13.$

A remittance of R$1000$ from Snow Ltd$.,$ included in the balance at current account, was not recorded by Hail Ltd$.$ until $3$ October, year $13.$

Required

$$ INTEC COLLEGE

$($Financial Accounting $1)$; $($FE$\_$DL$\_$FINACC$2\_$NQF$)$

$($A$-$FE$\_$DL$\_$FINACC$2\_$NQF$-$B$)$

Prepare the necessary journal entries:

$($a$)$to record the acquisition of Snow Ltd$.$ in the books of Hail Ltd$.$; and

$($b$)$the pro forma journal entries required to be added to the trial balance of Hail Ltd$.$so that the consolidated balance sheet can be prepared at $30$ September, year $13.$