Report Writing on HFAC333-Peanut Butter Limited & The Goldfish group - Accounting & Finance Assignment Help

Assignment Task

Task

Instructions:

•  This assignment consists of 2 scenario type questions.
•  It is based on units 1- 4 of your textbook (Chapters 1-3).
•  All of the questions are compulsory.
•  Show all calculations.
•  The SAICA Competency Framework Reference at the end of a question is for recordkeeping and will inform you which SAICA Competency is covered.

QUESTION 1 
PeanutButter Limited holds 60% of the issued ordinary shares of Brownie Limited, a listed company. The trial balances for both companies at 31 December 2021 were as follows:

Additional information:

•  PeanutButter Limited acquired the 60% interest in Brownie Limited on 1 January 2018 for R3 000. At that date, the retained earnings of Brownie Limited were R1 200. No further shares have been issued by Brownie Limited since the acquisition.
• At acquisition, all the assets and liabilities of Brownie Limited were fairly valued except for a machine that was considered undervalued by R500. The machine had a remaining useful life of 5 years.
• PeanutButter Limited accounts for its investment in a subsidiary as a ‘financial asset at fair value through other comprehensive income’ in its separate financial statements in terms of IFRS 9. The ‘investment in subsidiary’ account is therefore stated at fair value. Ignore deferred tax on any related temporary differences arising from this fair value adjustment.
• On 31 December 2019, goodwill relating to Brownie Limited was impaired by R230.
• During 2019, Brownie Limited took up 25% of the 12.5?bentures issued (at par) by PeanutButter Limited.
• On 1 January 2020, Brownie Limited acquired its only investment property for R3 600 and leased the property immediately to PeanutButter Limited at a rental of R200 per annum. The office building comprising of the investment property (the value of the land is immaterial) had a useful life of 20 years. Both companies account for investment property on the fair value model and property, plant, and equipment on the cost model. The investment property is held under a business model to fully recover the carrying amount through rentals.
• Brownie Limited supplies goods to PeanutButter Limited at cost plus 25%. Details of such sales and inventory held are as follows:

Sales by Brownie Limited to PeanutButter Limited:

• Year ended 31 December 2020: R550
• Year ended 31 December 2021: R1 700

Inventory purchased from Brownie Limited held by PeanutButter Limited:

•  Year ended 31 December 2020: R300
•  Year ended 31 December 2021: R950

1.  Non-controlling interest is initially measured at their proportionate share of the subsidiary’s identifiable net assets.
2.  For the purpose of this question, assume that a tax rate of 30% is applicable. Except in the case of bullet point three above, the deferred tax effect of all transactions, where relevant, must be accounted for.

REQUIRED:
Prepare the pro-forma journal entries necessary to consolidate Brownie Limited for the year ended 31 December 2021. 

QUESTION 2 
Goldfish is a diverse group of companies which holds investments globally. You are part of the financial team which needs to ensure that the investments below are accounted for in accordance with International Financial Reporting Standards (IFRS) for the financial year ended 31 December 2021.

At 31 December 2020 (the previous year-end), the consolidated equity of Goldfish and its subsidiaries (excluding Starfish Ltd (Starfish) as an associate) comprised of the following:

•  Total equity worth R14 500 000 of which R3 500 000 is share capital (1 000 000 shares), retained earnings were R2 000 000, the shareholder’s equity of the parent company was standing on R5 500 000, and non-controlling interest stood on R3 500 000 (for various horisontal subsidiaries)

Current year – 31 December 2021:

• The Goldfish group earned R3 000 000 profit after tax for the year ended 31 December 2021. Goldfish (the parent company) declared a dividend of R600 000 on 31 December 2021. This profit was correctly determined in accordance with IFRS. Goldfish's policy is to account for all investments in subsidiaries and associates at cost in its separate financial statements.
• The non-controlling interest’s share of the profit and the total comprehensive income amounted for the year ended 31 December 2021 to R1 007 600, and dividends allocated to these shareholders were R200 000.

Investment in Starfish Ltd:

• Goldfish acquired a 25% interest in Starfish on 1 August 2019 for R22 000. On 1 August 2019, the share capital of Starfish amounted to R80 000. Since 1 August 2019, Goldfish has participated in managing Starfish.
• Since 1 August 2019, Starfish’s profit forecasts have seemed optimistic. However, during 2020 Starfish suffered substantial operating losses due to a big oil tanker leakage killing a material number of fish in the ocean.
• Starfish revalued its fish plant on 31 December 2021 and recorded a revaluation surplus of R18 000 in other comprehensive income.
• Except for the revaluation above, the Goldfish group did not have any other ‘other comprehensive income’.

REQUIRED:

2.1) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income of the Goldfish Group for the year ended 31 December 2021. Your answer should comply with IFRS. No notes or comparative figures are required. Clearly show all calculations and work to the nearest Rand.
 
2.2) Prepare the Consolidated Statement of Changes in Equity of the Goldfish Group for the year ended 31 December 2021. Your answer should comply with IFRS. No notes or comparative figures are required. Clearly show all calculations and work to the nearest Rand. 

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