CHAPTER 4: GROUP STATEMENTS QUESTIONS – AFTER INITIAL ACQUISITION

QUESTION 1 (2012 CT)

The following abridged trial balances at 31 December 2012 were presented to you:

James Ltd Bond Ltd

Dr Cr Dr Cr
Non-current assets at carrying amounts
Property, plant and equipment 1 500 000 1 800 000
Investment in Berry Ltd:
960,000 shares @ cost 2 400 000
Inventory at cost 3 000 000 2 400 000
Debtors 1 200 000 1 620 000
Creditors 900 000 2 520 000
South African Revenue Services 300 000 180 000
Retained earnings 900 000 720 000
Balance at 1 January 2012 500 000 480 000
Profit from operations 2 112 000 1 080 000
Dividends received 288 000 0
Income tax -960 000 -480 000
Dividends declared -1 040 000 -360 000
Share capital
Ordinary shares of R2.00 each 6 000 000 2 400 000

8 100 000 8 100 000 5 820 000 5 820 000

James Ltd obtained the interest in Bold Ltd on 1 January 2012.

The assets were deemed to be fairly valued.

REQUIRED
(ADJUSTED):
Compile the following:
1 Consolidated statement of changes in equity for the year ended 31 December 2012 if
it is assumed that the consolidated net profit for the year after tax amounts to R1,632,000.
2 Consolidated statement of financial position at 31 December 2012- only the equity section.
 QUESTION 2 (2013 CT)
The Colour Group consists of the parent company, Pink Limited, and its subsidiary company,
Green Limited.
The following are the trial balances of the companies on 30 June 2013:

Notes Pink Limited Green Limited

Dr Cr Dr Cr
Share capital 625 000 406 500
Asset replacement reserve 875 000 -
Retained earnings (1/7/2012) 1 2 128 000 45 000
Profit before tax 1 805 000 41 000
Creditors 114 000 38 500
Shareholders for dividends 46 800 25 000
Land and buildings 2 3 655 300 343 500
Investment in Green Limited 375 000 -
Inventory 143 000 19 000
Debtors 175 000 57 500
Bank 640 000 97 000
Dividends receivable 20 000 -
Taxation expense 507 500 14 000
Dividends declared 3 78 000 25 000
5 593 800 5 593 800 556 000 556 000

Additional information:
1. Pink Limited purchased 80% of the shares in Green Limited for R375 000 on 1 July 2011.
The investment was paid for in cash. The balance of the retained earnings of Green
Limited on the date of acquisition amounted to R37 500.
2. All the other assets and liabilities were considered to be fairly valued on date of
acquisition.
3. The directors of Green Limited declared a dividend of R25 000 on 30 June 2013.
REQUIRED:
1. Calculate the closing balance (on 30 June 2013) of the retained income of Pink Ltd.
2. Show the analysis of the shareholders’ interest of Green Limited.
3. Show the pro-forma consolidation journal entry to give effect to the acquisition of Pink
Limited’s interest in Green Limited.
4. Prepare the consolidated statement of profit or loss and other comprehensive income of
The Colour Group for the year ended 30 June 2013.
5. Prepare the consolidated statement of changes in equity of The Colour Group for the year
ended 30 June 2013.
6. Prepare the consolidated statement of financial position of The Colour Group on 30 June
2013.
NB: Show all calculations.
Round off to the nearest rand.
 QUESTION 3 (2014 CT)- Self evaluation question
The following abridged financial statements of two companies were presented to you:
Hare Ltd Fill Ltd
STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2013
ASSETS
Non-current assets at carrying values 495 000 240 000
Property, plant and equipment 300 000 240 000
Investment in Fill Ltd:
72,000 shares @ cost 195 000 -

Current assets 150 000 120 000

Inventory at cost 100 000 80 000
Debtors 50 000 40 000

R 645 000 R 360 000

EQUITY AND LIABILITIES

Share capital and reserves
Shareholders' interest 390 000 210 000
Share capital - ordinary shares of R2.00 each 300 000 180 000
Retained earnings 90 000 30 000

Non-current liabilities
Interest bearing loans 150 000 105 000

Current liabilities 105 000 45 000

Creditors 70 000 30 000
Receiver of revenue 35 000 15 000

R 645 000 R 360 000

Hare Ltd purchased the shares in Fill Ltd on 1 January 2013 when their retained earnings
amounted to R20 000. The assets were deemed to be fairly valued. No dividends were declared
by Fill Ltd during the current year.
REQUIRED:
1. Prepare all the necessary pro forma journals entries to account for Fill Ltd in the
consolidated financial statements of the Hare Group for the year ended 31 December 2014.

2. Prepare the consolidated statement of financial position on 31 December 2014.

Note: Comparative figures are required.