The following trial balance was obtained from the financial records of Carpet Ltd for the financial year ended 28 February 2023:

Trail balance: Carpet Ltd

Ordinary share capital (R1 each) (CR) - 1 000000

Retained earnings (1 March 2022) (CR) - 337800

Revaluation surplus (1 March 2022) (CR) - 27160

Dividends paid 28 February 2023 (DR) - 20000

Trade and other payables (CR) - 295000

Deferred tax liability (CR) - 42000

Property, plant and equipment (carrying value) (DR) - 452000

Investments in equity instruments (fair value) (DR) - 388000

Trade and other receivables (DR) - 331000

Inventory (DR) - 210000

Bank (DR) - 345000

Sales (CR) - 427500

Cost of Sales (DR) - 342000

Other income (CR) - 9600

Other expenses (DR) - 50100

Income tax expense (DR) - 12600

Gain on fair value adjustments, after tax (OCI) (CR) - 11640

Total (DR) 2 150700

Total (CR) 2 150700

On 1 May 2021, Carpets equity comprised the following balances:

Ordinary share capital (R1 each) 1 000000

Retained earnings 165000

Revaluation surplus 15520

Total Equity 1 180520

All of Carpets assets and liabilities were considered to be fairly valued on 1 May 2021.

2. During the current financial year, Carpet started selling inventory to Decor at a 25% markup on cost. Inventory sales to Decor totalling R106 250 were included in the sales figure in the trial balance above. Decor on-sells all its inventory purchases to external parties. On 28 February 2023, Decor Ltds accounting records revealed that it had R84 000 of inventory purchased from Carpet that was still on hand.

3. At financial year end, after all dividends were paid and received, an impairment test was performed on Decors investment in Carpet after a breach of contract occurred between Carpet and one of Carpets main suppliers. The recoverable amount of Decors investment in Carpet was considered to be R315 000.

4. Carpet measures its investments in equity instruments at fair value through other comprehensive income. The revaluation surplus as well as gain in other comprehensive income relate only to fair value adjustments on the investments in equity instruments. No equity instruments were sold during any of the previous and current financial years.

Additional information:

All the entities mentioned above have a 28 February financial year end.

Decor accounts for investments in associates at cost in its separate financial statements.

Assume an Income Tax rate of 28% and a Capital Gains Tax inclusion rate of 80%.

Ignore the effects of Dividend Tax and Value Added Tax (VAT).

REQUIRED: Provide the pro-forma journal entries required to equity account Carpet Ltd for the financial year ended 28 February 2023. Dates and journal narrations are required. Show all your workings clearly (40 marks)