Question

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 interest’s 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

Answer 1

In Consolidation, A parent company which presents its consolidated financial statements must consolidate all of its subsidiaries, foreign as well as domestic. Where a company doesn’t have any subsidiary, however, has associates and/or joint ventures such company also needs to prepare consolidated financial statements.

Now, as required by the question, please find below the Consolidated Financial Statements which includes Consolidated balance sheet as well…..

	Mega Ltd.	Ultra Ltd.	Consolidated
ASSETS
Property, plant and equipment	2,70,000	3,40,000	6,10,000
Investment in Ultra Ltd: 48 000 shares at fair value	3,50,000	-	3,50,000
(cost: N$ 330 000)
Trade receivables	80,000	23,500	1,03,500
Inventories	3,50,000	2,18,000	5,68,000
Bank	65,000	-	65,000
Total assets	11,15,000	5,81,500
The EQUITY AND LIABILITIES
Share capital	4,00,000	2,40,000	6,40,000
Mark-to-market reserve	20,000	10,000	30,000
Retained earnings	3,75,000	2,40,000	6,15,000
Long-term borrowings	43,000	21,000	64,000
Trade and other payables	2,77,000	23,500	3,00,500
Bank overdraft		47,000	47,000
The Total equity & liabilities	11,15,000	5,81,500

I hope the solution is clear to you now. Do let me know if you have any issues. Refer the attached image for details .

All the best.