QUESTION GS4-1 (Suggested Solution)
a)
Proof of calcualtion of goodwill or gain from a bargain purchses Rand
Consideration transferred at acquisition date 110,000
Amount of non-controlling interest: -
110,000
Net identifieable assts acquired and liabilities assumed at acquistion date (110,000)
Goodwill -
Analysis of the shareholders' interest of Milly Ltd
Total Dolly Ltd 100%
SINCE NCI
AT RE 0%
AT DATE OF ACQUISITION
Share capital 100,000 100,000
Retained earnings 10,000 10,000
110,000 110,000 - -
Goodwill -
Consideration 110,000
SINCE ACQUISITION
· To beginning of current yr
Retained earnings
(16,200 - 10,000) 6,200 6,200
· Current year
Profit for the year (P/L) 9,800 9,800
Ordinary dividends (6,000) (6,000)
120,000 - 10,000 -
b)
Pro-forma Journal Entries
Debit Credit
J1 Rand Rand
Share Capital (Milly) 100,000
Retained earnings (Milly) 10,000
Investment in Milly Ltd (Dolly) 110,000
(Elimination of shareholders' interest of Milly Ltd against
investment account)
J2
Ordinary dividends received (Dolly) 6,000
Ordinary dividends paid (Milly) 6,000
(Elimination of intercompany dividend)
SOLGS4-1
QUESTION GS4-1 (Suggested Solution)
DOLLY LTD AND SUBSIDIARY
CONSOLIDATED STATEMENT OF PROFIT AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 20.24
Dolly Milly Journals GROUP
Rand Rand Rand
Profit from operations 26,000 14,000 40,000
Dividends received 6,000 - (6,000) dr -
Profit before tax 32,000 14,000 40,000
Income tax expenses (9,600) (4,200) (13,800)
Profit for the year 22,400 9,800 26,200
DOLLY LTD AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 20.24
Share Retained
Capital earnings Total
Rand Rand Rand
Balance at 31 December 20.23 160,000 23,800 183,800
Profit for the year 26,200 26,200
Ordinary dividend (16,000) (16,000)
Balance at 31 December 20.24 160,000 34,000 194,000
RE 23,800 = (Dolly) 17,600 + (Milly) 16,200 -10,000(JNL1)
Div 16,000 = (Dolly) 16,000 + (Milly) 6,000 - 6,000(JNL2)
SC 160 000 = (Dolly) 160 000 + (Milly) 100 000 - 100 000(JNL1)
DOLLY LTD AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20.24
Rand Rand Rand
ASSETS
Non-current assets 195,000 70,000 155,000
Property, plant and equipment 85,000 70,000 155,000
Investment in Milly Ltd 110,000 - (110,000) cr -
Current assets 35,000 65,000 100,000
Inventories 15,000 30,000 45,000
Receivables 20,000 35,000 55,000
TOTAL ASSETS 230,000 135,000 255,000
EQUITY AND LIABILITIES
Capital and reserves 184,000 120,000 194,000
Ordinary share capital (160 000 / 100 000 shares) 160,000 100,000 (100,000) dr 160,000
Retained earnings 24,000 20,000 (10,000) dr 34,000
Current liabilities 46,000 15,000 61,000
Payables 46,000 15,000 61,000
TOTAL EQUITY AND LIABILITIES 230,000 135,000 255,000
- - -
SOLGS4-1
QUESTION GS4-1 (suggested solution)
WORK SHEET
Journal Consol
Dolly Ltd Milly Ltd Dr Cr
Property, plant and equipment 85,000 70,000 155,000
Goodwill - - - -
Investment in Milly Ltd 110,000 - 110,000 -
Inventories 15,000 30,000 45,000
Receivables 20,000 35,000 55,000
230,000 135,000 255,000
Profit from operations 26,000 14,000 40,000
Dividends from Milly Ltd 6,000 - 6,000 -
Profit before tax 32,000 14,000 40,000
Income tax expense (9,600) (4,200) (13,800)
Profit after tax 22,400 9,800 26,200
Ordinary dividends (16,000) (6,000) 6,000 (16,000)
Retained earnings: for the yr 6,400 3,800 10,200
Retained earnings: beg of yr 17,600 16,200 10,000 23,800
Retained earnings: end of yr 24,000 20,000 34,000
Share Capital 160,000 100,000 100,000 160,000
Shareholders' equity 184,000 120,000 194,000
Non-controlling interest - - -
Payables 46,000 15,000 61,000
230,000 135,000 116,000 116,000 255,000
SOLGS4-1
