The trial balances of Hortic Ltd and Agric Ltd for the financial year ended 31 December 2019 are as follows:

Debits	Hortic Ltd R	Agric Ltd 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	6 900 000

Additional information:

1. Hortic Ltd acquired 35% of Agric Ltd during 2016 for R900 000, when Agric Ltd’s retained earnings were R450 000.

Hortic Ltd 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 Ltd 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 Ltd 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%

The Hortic Ltd Group accounts for investments in associates using the equity method in accordance with IAS 28. 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 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 (3½) Consolidated statement of changes in equity                                           (3½) 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”	(5)