The following are the condensed financial statements of P Ltd and its subsidiary S Ltd for the reporting period ended 31 March 2021:

STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2021

P Ltd S Ltd

ASSETS

Property, plant and equipment 2 000 000 600 000

Investment in S Ltd: 60 000 shares at cost 420 000 -

Loan to S Ltd 85 000 -

Inventories 615 000 120 000

Trade receivables 380 000 260 000

Total assets 3 500 000 980 000

EQUITY AND LIABILITIES

Share capital 2 500 000 500 000

Revaluation surplus - 40 000

Retained earnings 750 000 175 000

Loan from P Ltd - 85 000

Trade payables 250 000 180 000

Total equity and liabilities 3 500 000 980 000

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 March 2021

P Ltd S Ltd

Revenue 1 000 000 400 000

Cost of sales (480 000) (190 000)

Gross profit 520 000 210 000

Dividend received from S Ltd 12 000 -

Other expenses (232 000) (80 000)

Profit before tax 300 000 130 000

Income tax expense (80 000) (40 000)

PROFIT FOR THE YEAR 220 000 90 000

Other comprehensive income for the year, net of tax 30 000 -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 250 000 90 000

P Ltd S Ltd

Retained earnings Retained earnings

Balance at 1 April 2020 600 000 105 000

Changes in equity for 2021

Total comprehensive income for the year:

Profit for the year 220 000 90 000

Dividend paid (70 000) (20 000)

Other comprehensive income for the year - -

Balance at 31 March 2021 750 000 175 000

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ASSIGNMENT 4 (CONTINUED)

ADDITIONAL INFORMATION:

P Ltd bought 120 000 shares in S Ltd on 1 June 2016. At that date the equity of the companies were as follows:

P Ltd R S Ltd R

Authorised share capital:

P Ltd

2 000 000 Shares (one voting right attached to each share)

S Ltd

500 000 Shares (one voting right attached to each share)

Issued share capital:

1 000 000 shares 2 500 000 -

100 000 shares - 500 000

Other components of equity at 1 June 2016:

Revaluation surplus - 40 000

Retained earnings 400 000 60 000

P Ltd elected to measure the non-controlling interests in an acquiree at fair value. At the acquisition date the fair value of the non-controlling interests was R7,00 per share.

P Ltd recognises the investment in S Ltd using the cost method.

Assume that the identifiable assets acquired and the liabilities assumed at acquisition date are shown at their acquisition-date fair values, as determined in terms of IFRS 3.

Since 1 March 2017, P Ltd has acquired some of its inventories from S Ltd at cost price plus 33%. Total intragroup sales of inventories for the reporting period amounted to R200 000.

Included in the inventories of P Ltd were the following inventories that were purchased from S Ltd:

1 April 2020 R60 000

31 March 2021 R100 000

REQUIRED:

4.1 Prepare the pro-forma journals on consolidation for all intragroup items. (13)

Journal narratives are required, but tax implications may be ignored.

4.2 Prepare the analysis of the shareholders equity of S Ltd at 31 March 2021. (12)

4.3 Prepare the consolidated financial statements of P Ltd and its subsidiary for the reporting period ended 31 March 2021.

(25)

(50)