Chapter 30 - Gripping IFRS ICAP 2008 (Solution of Graded Questions)

Solutions to Gripping IFRS : Graded Questions
Wholly owned subsidiaries
Solution 30.1
PENGUIN LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 20X4 Gross profit Other income Rent income Operating expenses Property expenses Selling and administration expenses Depreciation Audit fees Profit before tax Income tax expense Profit for the period Other comprehensive income Total comprehensive income C 80 000
(22 000 15 000)
7 000 (38 300) 12 000 25 000 800 500 48 700 (13 636) 35 064 0 35 064
(11 060 + 2 576)
PENGUIN LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 20X4 Share capital C Balance at 30 June 20X3 200 000 Total comprehensive income Balance at 30 June 20X4 200 000
^ (40 000 + 10 000 10 000)
Retained earnings C ^40 000 35 064 75 064
Total C 240 000 35 064 275 064
Kolitz & Sowden-Service, 2009
Chapter 30: Page 1
Solution 30.1 continued

PENGUIN LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 20X4 C ASSETS Non-current assets Property, at cost Furniture - Cost - Accumulated depreciation Goodwill Current assets Inventory Accounts receivable Cash and cash equivalents EQUITY AND LIABILITIES Capital and reserves Share capital Retained earnings Current liabilities Accounts payable
(35 000 + 110 000) (6 000 + 2 000 - 400) (1 800 + 600 - 400)
145 000 5 600 7 600 (2 000) 10 000 80 000 33 600 40 300 314 500
(200 000 + 100 000 100 000) (68 440 + 16 624 10 000)/ (from SOCIE) (31 060 + 8 376)
200 000 75 064 39 436 314 500
Workings
Analysis of equity At acquisition Share capital Retained earnings Fair value of consideration transferred Goodwill Retained earnings at beginning of year At 01/07/X3 At acquisition
100 000 10 000 110 000 120 000 10 000 10 000 (10 000)
-
Pro forma consolidating journal entries 1. Share capital Retained earnings Goodwill Investment in S Limited Accumulated depreciation Furniture Rent received Rent paid Interest received Interest paid Loan from P Limited Debit 100 000 10 000 10 000 400 400 15 000 15 000 500 500 10 000 Credit
120 000
2. 3. 4. 5.
Chapter 30: Page 2

Loan to S Limited
10 000
Chapter 30: Page 3

Penguin Ltd Sardine Ltd Dr Share capital Retained earnings 1/7/20X3 Gross profit Rent received Interest received Loan form Penguin Ltd Accounts payable Accumulated depreciation 200 000 40 000 80 000 500 31 060 1 800 353 360 35 000 6 000 120 000 10 000 80 000 30 000 20 300 25 000 15 000 600 400 11 060 353 360 100 000 10 000 22 000 10 000 8 376 600 148 400 110 000 2 000 3 600 20 000 12 000 200 100 500 2 576 148 400 1) 1) 3) 4) 5) 2) 100 000 10 000 15 000 500 10 000 400 Consolidated adjustments Cr 200 000 40 000 80 000 7 000 39 436 2 000 368 436 155 000 7 600 80 000 33 600 40 300 12 000 25 000 800 500 13 636 368 436 Consolidated balances
Land and buildings Furniture Shares in Sardine Ltd Loan to Sardine Ltd Inventories Accounts receivable Cash Property expenses Selling & admin expenses Rent paid Depreciation Audit fees Interest paid Tax expense
1)
10 000 2) 1) 5) 400 120 000 10 000
3)
15 000
4)
500
Chapter 30: Page 4
Solution 30.2
PARDON LIMITED AND SORRY LIMITED GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X5 Revenue Cost of sales Gross profit Operating expenses Profit before tax Income tax expense Profit for the period Other comprehensive income Total comprehensive income C 119 000 69 000 50 000 (20 000) 30 000 (5 000) 25 000 0 25 000
(34 000 + 35 000)
PARDON LIMITED AND SORRY LIMITED GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 20X5 Share capital C Balance at 31 December 20X4 Total comprehensive income Dividends Balance at 31 December 20X5 200 000
200 000
Retained earnings C ^101 000 25 000 *(10 000) 116 000
Total C 301 000 25 000 (10 000) 316 000
^[71 000 + (45 000 15 000) ] *[10 000 + (5 000 5 000)] PARDON LIMITED AND SORRY LIMITED GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20X5 C ASSETS Non-current assets Goodwill Land and buildings, at carrying amount Plant and equipment, at carrying amount Current assets Inventories Accounts receivable Cash and cash equivalents
35 000 105 000 85 000 63 000 47 000 40 000 375 000
EQUITY AND LIABILITIES Capital and reserves Share capital Retained earnings Current liabilities Accounts payable
[200 000 + (75 000 75 000)]
200 000 116 000 59 000 375 000
Chapter 30: Page 5

Workings
Pardon Limited Sorry Limited Consolidated adjustments Dr 75 000 15 000 5 000 Cr 200 000 101 000 119 000 59 000 479 000 40 000 47 000 63 000 85 000 105 000 10 000 69 000 20 000 5 000 35 000 479 000 Consolidated balances
Share capital Retained earnings 1/1/20X5 Sales Dividend income Accounts payable
200 000 71 000 64 000 5 000 39 000 379 000 25 000 27 000 38 000 125 000 45 000 60 000 10 000 34 000 12 000 3 000 379 000
75 000 45 000 55 000 20 000 195 000 15 000 20 000 25 000 40 000 45 000 5 000 35 000 8 000 2 000
1) 1) 2)
Cash Accounts receivable Inventories Investment Plant and equipment net Land and buildings - net Dividends COS Operating expenses Taxation Goodwill
1)
125 000
2)
5 000
1) 195 000
35 000
Analysis of equity At acquisition Share capital Retained earnings 1/1/20X1 Fair value of consideration transferred Goodwill Retained earnings at beginning of year At 01/01/X5 At acquisition
75 000 15 000 90 000 125 000 35 000
45 000 (15 000) 30 000
Pro forma consolidation journal entries 1) Share capital Retained earnings Goodwill Investment in Sorry Ltd Dividend income Dividends paid Dr 75 000 15 000 35 000 Cr
125 000 5 000 5 000
2)
Chapter 30: Page 6
Solution 30.3
a)
PLUM LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 20X7 Revenue Cost of sales Gross profit Operating expenses Depreciation Rent Advertising Wages and salaries Profit before tax Income tax expense Profit for the period Other comprehensive income Total comprehensive income C 840 000 634 000 206 000 1 000 19 000 6 000 27 000 153 000 61 200 91 800 0 91 800
[(45 + 270) + (98 + 561) (55 + 285)]
PLUM LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 20X7 Share capital C 155 000 155 000
Balance at 28 February 20X6 Total comprehensive income Balance at 28 February 20X7
Retained earnings C ^50 000 91 800 141 800
Total C 205 000 91 800 296 800
^ [41 000 + (19 000 10 000)] b)

PLUM LIMITED AND ITS SUBSIDIARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 28 FEBRUARY 20X7 Plant at cost Accumulated depreciation
(10 000 3 000) (4 000 3 000 + 1 000)
C 7 000 (2 000) 5 000
Chapter 30: Page 7

Workings
Analysis of equity of Seed (Pvt) Limited At acquisition Share capital Retained earnings Fair value of consideration transferred Goodwill Retained earnings at beginning of year At 01/03/X6 At acquisition
10 000 10 000 20 000 25 000 5 000
19 000 (10 000) 9 000
Adjusting entries in the accounting records of Seed (Pvt) Ltd Depreciation expense Accumulated depreciation ^ Advertising expense Current a/c Plum Limited Administration fee Current a/c Plum Limited Taxation expense Current tax payable Dividend Shareholders for dividend Dr 1 000 Cr 1 000 3 000 3 000 6 000 6 000 46 800 46 800 10 000 10 000
Adjusting entries in the accounting records of Plum Limited Taxation expense Current tax payable Dividend receivable Dividend income 14 400 14 400 10 000 10 000
^ Ledger of Plum Limited Current a/c Seed Description

Balance
Ledger of Seed Limited Current a/c Plum C Description C Description C

12 000 3 000 6 000 21 000 Balance 21 000 Balance Advertising expense 21 000 Administration fee 21 000
C
21 000
Description
Balance 21 000 Balance 21 000
21 000 21 000
Balance
Chapter 30: Page 8

Pro forma consolidating journal entries 1. Share capital Retained earnings Goodwill Investment in subsidiary Accumulated depreciation Plant (4 000 1 000) Loan account - Plum Ltd Loan account - Seed Ltd Current account - Plum Ltd Current account - Seed Ltd Interest received Interest paid Administration fee income Administration fee expense Dividend income Dividend paid Shareholders for dividend Dividend receivable Debit 10 000 10 000 5 000 Credit
25 000 3 000 3 000
2.
3.
120 000 120 000 21 000 21 000 12 000 12 000 6 000 6 000 10 000 10 000 10 000 10 000
4.
5.
6.
7.
8.
Chapter 30: Page 9
Solution 30.4
PINK LIMITED AND SCARLET LIMITED GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20X4 Gross profit Operating expenses Depreciation plant Audit fees Profit before tax Income tax expense Profit for the period Other comprehensive income Total comprehensive income C 232 000
(12 000 + 5 000 + 1 000)
(30 000 + 11 000 350)
(18 000) (4 000) 210 000 (40 650) 169 350 0 169 350
PINK LIMITED AND SCARLET LIMITED GROUP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 20X4 Share capital Retained earnings C C Balance at 1 January 20X4 400 000 ^185 000 Total comprehensive income 169 350 Dividends *(65 000) Balance at 31 December 20X4 400 000 289 350
Total C 585 000 169 000 (65 000) 689 000
^ (185 000 + 50 000 50 000) * (65 000 + 30 000 30 000)
Chapter 30: Page 10

PINK LIMITED AND SCARLET LIMITED GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20X4 C ASSETS Non-current assets Goodwill, at cost Land, at cost Plant - Cost - Accumulated depreciation Current assets Inventories Accounts receivable Cash and cash equivalents
(120 000 + 50 000 20 000 + 6 000) (36 000 + 25 000 20 000 + 1 000)
6 100 260 000 114 000 156 000 (42 000) 170 000 110 000 98 000 758 100
EQUITY AND LIABILITIES Capital and reserves Share capital Retained earnings Non-current liabilities Deferred tax Current liabilities Accounts payable
400 000 289 350

(2 100 350)
1 750 67 000 758 100
Chapter 30: Page 11

Workings
Analysis of equity At acquisition Share capital Retained earnings Plant (36 000 30 000) Deferred tax Fair value of consideration transferred Goodwill
(6 000 X 0.35)
60 000 50 000 110 000 6 000 (2 100) 113 900 120 000 6 100
Plant Cost Accumulated depreciation 1/1/X4 Carrying amount 1/1/X4 Depreciation 31/12/X4
Years 10 (4) 6
Scarlet Ltd 50 000 (20 000) 30 000 (5 000) 25 000
Consolidation adjustment
Group
6 000 (1 000) 5 000
36 000 (6 000) 30 000
1/1/X4
Carrying amount Group adjustment Depreciation / Tax allowance
31/12/X4
Group CA 30 000 6 000 36 000 (6 000) 30 000
TB
TD
DT
30 000 (5 000) 25 000
6 000 (1 000) 5 000
2 100 350 1 750
Cr Dr Cr
Chapter 30: Page 12

Pro forma consolidation journal entries (1) Share capital Retained earnings Plant Goodwill Deferred tax Investment in Scarlet Limited Dividend income Dividends paid Interest income Interest expense Loan from Pink Limited Loan to Scarlet Limited Accumulated depreciation - plant Plant Depreciation Accumulated depreciation - plant Deferred tax Taxation Debit 60 000 50 000 6 000 6 100 Credit
2 100 120 000 30 000 30 000 3 000 3 000 60 000 60 000 20 000 20 000 1 000 1 000 350 350
(2)
(3)
(4)
(5)
(6)
(7)
Pink Limited
Scarlet Limited Dr
Consolidated adjustments Cr 7) 6) 1 000 3) 2) 1) 6 000 5) 1) 4) 3 000 30 000 20 000 120 000 60 000 350
Consolidated balances 40 650 18 000 4 000 65 000 260 000 156 000 170 000 110 000 68 000 6 100 927 750 232 000
Taxation Depreciation Interest Audit fees Dividends Land and buildings Plant Investment in Scarlet Limited Loan to Scarlet Limited Inventories Accounts receivable Cash Goodwill
30 000 12 000 3 000 65 000 200 000 120 000 120 000 60 000 140 000 80 000 70 000 900 000
11 000 5 000 3 000 1 000 30 000 60 000 50 000
30 000 30 000 28 000 1) 248 000 40 000 2) 3) 50 000 60 000 60 000 13 000 25 000 248 000 1) 1) 4) 5) 7) 30 000 3 000 50 000 60 000 60 000 20 000 350 6) 1) 1 000 2 100 6 100
Trading profit Dividend income Interest Retained earnings (1 January 20X4) Share capital Loan from Pink Limited Accounts payable Accumulated depreciation Deferred tax
192 000 30 000 3 000 215 000 400 000 54 000 36 000 900 000
185 000 400 000 67 000 42 000 1 750 927 750
Chapter 30: Page 13
Solution 30.5
PLANE LIMITED AND SHIP LIMITED GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 20X9 Profit before tax Income tax expense Profit for the period Other comprehensive income Total comprehensive income
(44 750 + 25 000 1 000 10 000) (27 400 400)
C 58 750 (27 000) 31 750 0 31 750
PLANE LIMITED AND SHIP LIMITED GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 20X9 Share capital C 225 000 Balance at 30 June 20X8 Total comprehensive income Dividends - paid 225 000 Balance at 30 June 20X9
* [37 000 + (28 000 25 000 1000 + 400)]
Retained earnings C *39 400 31 750 (11 000) 60 150
Total C 264 400 31 750 (11 000) 285 150
PLANE LIMITED AND SHIP LIMITED GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 20X9 C ASSETS Non-current assets Goodwill, at cost Land and buildings, at cost Plant and machinery - Cost - Accumulated depreciation Current assets Inventories Accounts receivable Cash and cash equivalents
(135 000 +70 000 14 000 + 8 000) / (135 000 + 64 000) (40 500 + 28 000 14 000 + 2 000) / (40 500 + 16 000)
9 200 125 800 142 500 199 000 (56 500) 99 800 36 300 2 000 415 600
EQUITY AND LIABILITIES Capital and reserves Share capital Retained earnings Non-current liabilities 10% Debentures Deferred tax Current liabilities Accounts payable Current tax payable
225 000 60 150 15 000 2 400 89 050 24 000 415 600
(3 200 800)
Chapter 30: Page 14

Workings
Analysis of equity of Ship Limited At acquisition Share capital Retained earnings Plant and machinery Deferred tax Fair value of consideration transferred Goodwill Retained earnings at beginning of year At 30/6/20X8 On acquisition Additional depreciation Deferred tax
50 000 25 000 8 000 (3 200) 79 800 89 000 9 200
28 000 (25 000) 3 000 (1 000) 400 2 400
Current year Profit for the period Additional depreciation Deferred tax
15 500 (1 000) 400 14 900 (10 000)
Dividends
Plant Cost Accumulated depreciation 1/7/20X7 Balance 1/7/20X7 Depreciation 30/6/20X8 Depreciation 30/6/20X9
Years 10 *(2) 8
Ship Limited 70 000 (14 000) 56 000 (7 000) (7 000) 42 000
Consolidation adjustment
Group
8 000 (1 000) (1 000) 6 000
64 000 (8 000) (8 000) 48 000
*C28 000 accumulated depreciation at 30/06/X9 . .Plant 2 years old at 01/07/X7
Chapter 30: Page 15

Pro forma consolidation journal entries 1) Share capital Retained earnings Plant and machinery Goodwill Deferred tax Investment in Ship Limited Accumulated depreciation - P&M Plant and machinery 2) Retained earnings Accumulated depreciation - P&M Deferred tax Retained earnings 3) Profit before tax Accumulated depreciation P&M Deferred tax Taxation Profit before tax Dividends paid 10% debentures Debentures in Ship Limited Interest income Interest expense Debit 50 000 25 000 8 000 9 200 Credit
3 200 89 000 14 000 14 000 1 000 1 000 400 400 1 000 1 000 400 400 10 000 10 000 10 000 10 000 1 000 1 000
Chapter 30: Page 16

Plane Limited Ship Limited Consolidation adjustments Dr 50 000 25 000 1 000 1 000 10 000 10 000 14 000 Cr 225 000 2) 400 39 400 58 750 15 000 2) 3) 1 000 1 000 Consolidated balances
Share capital Retained earnings 1/7/20X8 Net profit before tax 10% debentures Accumulated depreciation - P&M Accounts payable Current tax payable Deferred tax
225 000 37 000 44 750 40 500 61 350 14 500
50 000 28 000 25 000 25 000 28 000 27 700 9 500
1)* 1)* 2)* 3) 3) 3) 1)
2) 3) 423 100 193 200 42 800 70 000 45 000 15 000 900 9 500 10 000 193 200
400 400
1)
3 200
56 500 89 050 24 000 2 400 510 100 125 800 199 000 99 800 36 300 2 000 27 000 11 000 9 200 510 100
Land and buildings Plant and machinery Shares in Ship Limited Debentures in Ship Limited Inventories Accounts receivable Cash Taxation Dividends paid Goodwill
83 000 135 000 89 000 10 000 54 800 21 300 1 100 17 900 11 000 423 100
1)
8 000
1) 1) 3)
14 000 89 000 10 000
3) 3) 1) 9 200
400 10 000
*Entry reference no. of consolidation entries on previous page.
Chapter 30: Page 17
Solutions to Gripping IFRS : Graded Questions Solution 30.6

PRODUCTION LIMITED AND STRIKE LIMITED GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 20X9
C ASSETS Non-current Land at cost Plant and equipment at carrying amount Goodwill Current assets Inventories Accounts receivable Cash and cash equivalents
(500 000 + 20 000 20 000)
500 000 2 500 000 5 600 250 000 400 000 155 000 3 810 600
EQUITY AND LIABILITIES Capital and reserves Share capital Non-distributable reserves Retained earnings Non-current liabilities Long term liabilities Current liabilities Accounts payable
(59 500 14 400) (P: 450 000 + S: 140 500 30 000 20 000 + 5 600 + 14 400) (600 000 + 24 500 100 000)
2 000 000 45 100 560 500 745 000 460 000 3 810 600
Workings
Analysis of equity of Strike Ltd At acquisition Share capital Retained earnings Increase in land Deferred tax Fair value of consideration transferred Goodwill
(125 000 105 000) (20 000 X 0.28)
50 000 30 000 20 000 (5 600) 94 400 100 000 5 600
Chapter 30: Page 18

Pro forma consolidation journal entries 1. Share capital Retained earnings Land Deferred tax Goodwill Investment in subsidiary Long-term loan Loan to subsidiary Profit on sale of land Land Deferred tax Tax expense NDR Retained earnings Debit 50 000 30 000 20 000 5 600 100 000 100 000 100 000 20 000 20 000 5 600 5 600 14 400 14 400 Credit
5 600
2.
3.
5.
Consolidation adjustments Production Land Plant & equipment. Investment in subsidiary Loan to subsidiary Goodwill Inventories Accounts receivable Cash Strike 500 000 2 500 000 100 000 100 000 5 600 250 000 400 000 150 000 3 500 000 2 000 000 450 000 600 000 450 000 3 500 000 1) Dr 20 000 1) Cr 20 000 100 000 100 000 3) 1) 2)
Consolidated balances 500 000 2 500 000
5 000 505 000 50 000 59 500 140 500 245 000 10 000 505 000 50 000 14 400 30 000 20 000 100 000 5 600 1) 5) 1) 3) 2) 4)
5 600 250 000 400 000 155 000 3 810 600 2 000 000 45 100 560 500 745 000 460 000 5 600 3 810 600
Share capital NDR Retained earnings Long term loan Accounts payable Deferred tax
5 600
4)
5 600
1)
Sale of land and buildings during the year Selling price Cost Subsidiary 175 105 70 Group 175 125 50
Chapter 30: Page 19
Solution 30.7
a) Journal entries in accounting records of Peanut Limited
GENERAL JOURNAL OF PEANUT LIMITED Debit 01/07/20X5 Investment in Salt Limited Bank Bank Dividend income 1 763 000 1 763 000 10 000 10 000 Credit
15/06/20X7
b) Proforma consolidation journal entries:
Debit 1 At acquisition Share capital (500 000+1 000 000) Retained earnings (1 650 000+550 000) Non-distributable reserve Plant Deferred tax Goodwill Investment in Salt Limited Investment in Smooth Limited Elimination of share capital and reserves at acquisition Accumulated depreciation - Building Buildings Reversal of accumulated depreciation at acquisition Beginning of year Retained earnings Accumulated depreciation - Plant Additional depreciation to boy due to revaluation of Salts plant at acquisition (75 000 X 2) Deferred tax Retained earnings Deferred tax to beginning of year on additional depreciation due to revaluation (21 750 X 2) 1 500 000 2 200 000 550 000 300 000
Credit
87 000 95 000 1 763 000 2 795 000
2.
315 000 315 000
150 000 150 000
43 500 43 500
Chapter 30: Page 20

Debit 5 Current year Profit before tax Accumulated depreciation - Plant Additional depreciation in current year due to revaluation at acquisition Deferred tax Taxation Deferred tax in current year on additional depreciation due to revaluation Current year sale of plant Accumulated depreciation - Plant Plant Reversing additional depreciation as asset sold (150 000 + 75 000) Profit before tax Plant Group adjustment to profit on sale of plant Deferred tax Taxation Deferred tax on group adjustment to profit on sale of plant Investment in Salt Limited Profit before tax Reversing parent impairment of investment Current year inter-company transactions Profit before tax Dividend paid Eliminating inter-company dividend Interest received Profit before tax Eliminating inter-company interest Loan from Pepper Limited Loan to Smooth Limited Eliminating inter-company loan 75 000 75 000 Credit
21 750 21 750
225 000 225 000
75 000 75 000
21 750 21 750
10
35 000 35 000
11
110 000 110 000
12
65 000 65 000
13
500 000 500 000
(Note that there is no journal entry eliminating the C460 000 accumulated depreciation on the plant at acquisition, as the plant is now sold).
Chapter 30: Page 21

c) Extracts from consolidated statement of financial position
PEANUT LIMITED AND ITS SUBSIDIARY COMPANIES EXTRACTS FROM THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 20X7 C EQUITY AND LIABILITIES Equity Share capital Non-distributable reserve Non-current liabilities Long term loan Current liabilities Accounts payable
(1 400 000 + 1 500 000 550 000)
1 000 000 2 350 000
(1 500 000 + 900 000)
2 400 000
(182 500 + 190 000 +167 900)
540 400
Workings
Plant Cost 1/7/X3 Depreciation to 30/6/X4 At acquisition Depreciation 30/6/X5 Depreciation 30/6/X6 Depreciation 30/6/X7 CA at date of sale Salt Ltd 2 300 000 (460 000) 1 840 000 (460 000) (460 000) 920 000 (460 000) 460 000 Consolidation adjustment Group
300 000 (75 000) (75 000) 150 000 (75 000) 75 000
2 140 000 (535 000) (535 000) 1 070 000 (535 000) 535 000
Selling price Carrying amount Profit/ (loss)
Salt Ltd 500 000 460 000 40 000
Group 500 000 535 000 (35 000)
Chapter 30: Page 22

Analysis of equity at 30 June 20X7 1. At acquisition: Share capital Retained earnings Non-distributable reserve Plant Deferred tax Fair value of consideration Goodwill 2. Beginning of year: NDR 1 July 20X6 - on acquisition Salt Ltd 1 July 20X3 1 000 000 550 000 0 300 000 (87 000) 1 763 000 1 763 000 0 Smooth Ltd 1July 20X4 500 000 1 650 000 550 000 0 0 2 700 000 2 795 000 95 000
0 0 0 930 000 (550 000) 380 000 (150 000) 43 500 273 500
1 500 000 (550 000) 950 000 4 400 000 (1 650 000) 2 750 000 0 0 2 750 000
Retained earnings 1 July 20X6 - on acquisition Additional depreciation Deferred tax
3. Current year: Profit before tax - taxation - additional depreciation + Deferred tax - group adjustment on sale of plant + Deferred tax 197 350 (57 232) (75 000) 21 750 (75 000) 21 750 33 618 10 000 2 985 900 (865 911) 0 0 0 2 119 989 100 000
Dividends
Chapter 30: Page 23
Solution 30.8
a) Pro-forma consolidating journal entries for the year ended 30/12/X4
Debit 200 000 80 000 36 000 26 500 7 500 7 500 40 000 40 000 40 000 40 000 50 000 50 000 2 250 2 250 Credit
Ordinary share capital Retained earnings Non-distributable reserve Investment in Salt Limited Goodwill Investment in Salt Limited Retained earnings Profit before taxation (Dividend income) Dividend declared Dividend payable Dividend receivable Loan from Pepper Limited Loan to Salt Limited Profit before tax (Interest income) Profit before tax (Interest expense)
342 500
c) Consolidated SOCIE
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 20X4 Ordinary share capital NDR C C 01/01/X4 Balance `450 000 Total comprehensive income Revaluation of land #7 200 Dividend 31/12/X4 450 000 7 200
` (450 000 + 200 000 200 000) ^ (112 500 + 72 500 80 000 + 7 500) * (132 142 40 000 + 64 285 27 642 19 285) # (10 000 X 0.72) ~ (50 000 + 40 000 40 000)
Retained earnings C ^112 500 *109 500 ~(50 000) 172 000
Total C 562 500 109 500 7 200 (50 000) 629 200
Chapter 30: Page 24
Solution 30.8 continued . . .

d) Extract from consolidated statement of financial position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20X4 C ASSETS Non-current assets Goodwill Land Plant and equipment Current assets Accounts receivable Cash 275 000 26 500 150 000 105 000
(64 000 + 42 000)
106 000 318 000
Workings
Analysis of equity of Salt Limited at 31 December 20X4
At acquisition Ordinary share capital Retained earnings NDR Fair value of consideration Goodwill Beginning of year Retained earnings / NDR at 01/01/X4 Retained earnings / NDR at acquisition
(50 000 X 0.72)
200 000 80 000 36 000 316 000 342 500 26 500
72 500 80 000 (7 500)
36 000 36 000 0
Analysis of retained earnings of Salt Limited (not needed for solution)

Total 80 000 32 500 (40 000) 72 500 45 000 (40 000) 77 500 Before 80 000 (7 500) 72 500 Since 32 500 (32 500) 45 000 (40 000) 5 000
01/01/X3 31/12/X3
At acquisition Profit Dividend Profit Dividend
31/12/X4
72 500
Chapter 30: Page 25

Chapter 30 - Gripping IFRS ICAP 2008 (Solution of Graded Questions)

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Chapter 30 - Gripping IFRS ICAP 2008 (Solution of Graded Questions)

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Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

(11 060 + 2 576)

Retained earnings C ^40 000 35 064 75 064

Total C 240 000 35 064 275 064

Kolitz & Sowden-Service, 2009

Chapter 30: Page 1

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

Solution 30.1 continued

200 000 75 064 39 436 314 500

Kolitz & Sowden-Service, 2009

Chapter 30: Page 2

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

Kolitz & Sowden-Service, 2009

Chapter 30: Page 3

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

Solution 30.1 continued

10 000 2) 1) 5) 400 120 000 10 000

Kolitz & Sowden-Service, 2009

Chapter 30: Page 4

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

(34 000 + 35 000)

Retained earnings C ^101 000 25 000 *(10 000) 116 000

Total C 301 000 25 000 (10 000) 316 000

35 000 105 000 85 000 63 000 47 000 40 000 375 000

[200 000 + (75 000 75 000)]

200 000 116 000 59 000 375 000

Kolitz & Sowden-Service, 2009

Chapter 30: Page 5

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

Solution 30.2 continued

75 000 15 000 90 000 125 000 35 000

45 000 (15 000) 30 000

125 000 5 000 5 000

Kolitz & Sowden-Service, 2009

Chapter 30: Page 6

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

[(45 + 270) + (98 + 561) (55 + 285)]

Balance at 28 February 20X6 Total comprehensive income Balance at 28 February 20X7

Retained earnings C ^50 000 91 800 141 800

Total C 205 000 91 800 296 800

^ [41 000 + (19 000 10 000)] b)

C 7 000 (2 000) 5 000

Kolitz & Sowden-Service, 2009

Chapter 30: Page 7

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries

Solution 30.3 continued

10 000 10 000 20 000 25 000 5 000

19 000 (10 000) 9 000

^ Ledger of Plum Limited Current a/c Seed Description

Ledger of Seed Limited Current a/c Plum C Description C Description C

Balance 21 000 Balance 21 000

Kolitz & Sowden-Service, 2009

Chapter 30: Page 8

Solutions to Gripping IFRS : Graded Questions

Wholly owned subsidiaries