QUESTION 4 (55 MARKS) P Ltd purchased the 60 000 shares in S Ltd on 1 July 2015, when the retained earnings of S Ltd was R12 000. P Ltd paid R90 000 for the investment in ordinary shares. S Ltd sold the machinery at cost price plus 25% for R15 000 on 30 June 2016, and the machinery was not part of inventories in the records of S Ltd. S Ltd depreciates the machinery over the remaining useful life of the asset of five years. S Ltd purchases inventories from P Ltd at a mark-up on cost of 20%. Total inventories to the value of R180 000 were sold to S Ltd by P Ltd during the reporting period. Inventories purchased from P Ltd that were unsold at 30 June 2017 R3000 and 30 June 2018 were R6 000 At the end of the reporting period 30 June 2018, S Ltd still owed P Ltd R2 400 in respect of the inventories purchased from P Ltd. These amounts are included in trade receivables and trade and other payables. P Ltd classified the equity investment in S Ltd under IFRS 9 in the separate financial statements and recognised the investment at cost price. P Ltd elected to measure the non-controlling interests at their fair value of R1.25 per share at the acquisition date. The corporate tax rate is 28 %. 5 The following are the extracts financial statements of P Ltd and its subsidiary S Ltd for the year ended 30 June 2018: EXTRACTS Statement of Comprehensive income statement for the year ending 30 June 2018 P Ltd R S Ltd R 480 000 -314 000 166 000 280 000 - 168 000 112 000 Revenue Cost of Sales Gross Profit Other Income Dividends received Total income Depreciation Other expenses 6 000 172 000 -20 000 -84 500 0 112 000 -8 000 -52 400 Profit before tax Income tax expense 67 500 -15 500 51 600 -11 600 PROFIT FOR THE YEAR Other comprehensive income for the year TOTAL COMPREHENSIVE INCOME FOR THE YEAR 52 000 0 52 000 40 000 0 40 000 EXTRACTS Statements of changes in equity for the year ending 30 June 2018. Retained earnings P Ltd R 6 58 000 50 000 Balance at 1 July 2017 Changes in equity for 2018 Total comprehensive income for the year: Profit for the year Ordinary dividend 52 000 -14 000 40 000 -10 000 Balance at 30 June 2018 96 000 80 000 EXTRACTS Statements of Financial position as at 30 June 2018 P Ltd R S Ltd R ASSETS Non-Current assets Plant cost price Accumulated depreciation Investments 120 000 200 000 -80 000 90 000 48 000 80 000 -32 000 0 Current assets Inventories at cost Trade Receivables Bank 168 100 40 000 106 000 22 100 191 200 88 800 102 400 Total assets 378 100 239 200 EQUITY AND LIABILTIES 200 000 96 000 100 000 80 000 Share capital Retained Income Non-controlling interest Deferred Tax Current liabilities Trade payable Bank overdraft 4 500 300 500 77 600 65 000 12 600 180 000 59 200 56 000 3 200 Total equity and liabilities 378 100 239 200 (Show all tax implications in your answers) YOU ARE REQUIRED TO (a) Prepare the analysis of equity of S Ltd (7 marks). (b) Prepare the Consolidated Statement of Profit and Loss and Other Comprehensive income of the P Ltd Group for the reporting period ended 30 June 2018 (20 marks). (c) Prepare the Consolidated Statement of Financial Position of P Ltd Group for the year ended 30 June 2018 (28 marks)