Required:

Q.2.1

Prepare the proforma journal entries for the Hortic Ltd Group to reflect the equity accounting of the associate for the year ended 31 December 2019. (13)

Q.2.2

Prepare the group annual financial statements for the Hortic Ltd Group for the year ended 31 December 2019:

* Consolidated statement of profit or loss and other comprehensive income (312) * Consolidated statement of changes in equity (312) * Consolidated statement of financial position (5)

(No notes or comparatives are required but in all other respects your answer must comply with International financial reporting standards (IFRS) (12)

Q.2.3

Prepare the supporting note to the statement of financial position for the "Investment in Associate"

Question 2 (Marks: 30) The trial balances of Hortic Lid and Agric Ltd for the financial year ended 31 December 2019 are as follows: Hortic Ltd Agric Ltd Debits R R Property, plant and equipment 12 000 000 2 550 000 Investment in Agric Ltd 900 000 Inventory 1 050 000 900 000 Debtor: Agric Ltd 150 000 Other assets 2 700 000 300 000 Cost of sales 6 600 000 2 100 000 Other expenses 900 000 150 000 Income tax expense 750 000 450 000 Dividends declared and paid 600 000 450 000 25 650 000 6 900 000 Credits Ordinary share capital 7 500 000 1 500 000 Retained earnings: 1 January 2019 6 000 000 750 000 Trade payables and other liabilities 1 050 000 450 000 Creditor: Hortic Ltd 150 000 Revenue 10 500 000 4 050 000 Dividends received 600 000 25 650 000 6 900 000Additional information: 1 Hortic Lid acquired 35% of Agric Ltd during 2016 for R900 000, when Agric Ltd's retained earnings were R450 000. Hortic Lid exercises significant influence over the accounting policies and management of Agric Ltd. 2 All Agric Ltd's assets and liabilities were fairly valued at the date of the acquisition of its shares by Hortic Lid and Agric Ltd had no unrecognised assets or liabilities and no contingent liabilities at the date of acquisition. 3 During 2019, Agric Ltd sold inventory to Hortic Lid at a mark-up of 100% on cost. These sales amounted to R600 000 for the year. Hortic Ltd still had inventory purchased from Agric Ltd of R120 000 on hand at 31 December 2019. 4 The SA normal tax rate is 28%5 The Hortic Lid Group accounts for investments in associates using the equity method in accordance with IAS 28. 6 The carrying amount of the investment in Agric Ltd is considered to be its fair value. Required: Q.2.1 Prepare the pro-forma journal entries for the Hortic Lid Group to reflect the equity (13) accounting of the associate for the year ended 31 December 2019. Q.2.2 Prepare the group annual financial statements for the Hortic Lid Group for the (12) year ended 31 December 2019: * Consolidated statement of profit or loss and other comprehensive income (31/2) * Consolidated statement of changes in equity (31/2) * Consolidated statement of financial position (5) (No notes or comparatives are required but in all other respects your answer must comply with International financial reporting standards (IFRS)Q.2.3 Prepare the supporting note to the statement of financial position for the (5) "Investment in Associate"