ADMS 4520 Lecture : adms4520_-_lecture_3_-_ch.docx
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QUESTION 1 30 MARKS
The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd:
Statement of financial position as at 31 December 2018 | ||||||
Mega Ltd | Ultra Ltd | |||||
ASSETS | ||||||
Property, plant and equipment | 270 000 | 340 000 | ||||
Investment in Ultra Ltd: 48 000 shares at fair value | 350 000 | - | ||||
(cost: N$ 330 000) | ||||||
Trade receivables | 80 000 | 23 500 | ||||
Inventories | 350 000 | 218 000 | ||||
Bank | 65 000 | - | ||||
Total assets | 1 115 000 | 581 500 | ||||
EQUITY AND LIABILITIES | ||||||
Share capital | 400 000 | 240 000 | ||||
Mark-to-market reserve | 20 000 | 10 000 | ||||
Retained earnings | 375 000 | 240 000 | ||||
Long-term borrowings | 43 000 | 21 000 | ||||
Trade and other payables | 277 000 | 23 500 | ||||
Bank overdraft | - | 47 000 | ||||
Total equity and liabilities | 1 115 000 | 581 500 |
Statement of profit or loss and other comprehensive income for the year ended | ||||||
31 December 2018 | ||||||
Mega Ltd | Ultra Ltd | |||||
Revenue | 927 000 | 1 628 000 | ||||
Cost of sales | -472 000 | -725 000 | ||||
Gross profit | 455 000 | 903 000 | ||||
Other expenses | -287 100 | -472 000 | ||||
Dividend received from Ultra Ltd | 94 000 | - | ||||
Profit before tax | 261 900 | 431 000 | ||||
Income tax expense | -198 000 | -128 000 | ||||
Profit for the year | 63 900 | 303 000 | ||||
Other comprehensive income | ||||||
Items that will not be reclassified to profit or loss | ||||||
Mark-to-market reserve | 4 000 | 1 000 | ||||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 67 900 | 304 000 |
Extract from the Statement of changes in equity for the year ended 31 December 2018 | ||||
Mark-to-market reserve | Retained earnings | |||
Mega Ltd | Ultra Ltd | Mega Ltd | Ultra Ltd | |
Balance at 1 Jan 2018 | 15 000 | 8 000 | 215 000 | 170 000 |
Changes in equity for 2018 | ||||
Total comprehensive income for the year: | ||||
Profit for the year | 63 900 | 303 000 | ||
Other comprehensive income for the year | 4 000 | 1 000 | ||
Dividends | -108 000 | -120 000 | ||
Balance at 31 December 2018 | 19 000 | 9 000 | 170 900 | 353 000 |
Additional information:
On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of:
Share capital N$ 260 000
Mark-to-market reserve N$ 3 000
Revaluation reserve N$ 7 000
Retained earnings N$ 135 000
Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interestâs share was N$8,50 per share, based on market prices.
Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications.
REQUIRED
Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks