QUESTION THREE (30 MARKS)

Question

KK Ltd regularly sells goods to its wholly-owned subsidiary company Ash Ltd, which it has owned since Ash Ltd.'s incorporation. The statement of financial position of the two companies on 28th February 2020 is given below.
Required: Prepare a consolidated account for the group that ended 28th February 2020.

STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2020
KK Ltd (R) Ash Ltd (R)
Assets
Non-Current Assets 90,000 60,000
PPE 35,000 60,000
Investments in 55,000 shares in Ash Ltd at cost 55,000
Current Assets 55,000 51,000
Inventory 16,000 27,000
Trade receivable: Ash Ltd 2,000
Other 21,000 24,000
Bank 16,000
Total Assets 145,000 111,000
Equity and Liability
Members' interest and reserves 116,000 69,000
55,000 R1 ordinary shares 55,000
85,000 R1 ordinary shares 85,000
Retained earnings 31,000 14,000
Non-Current Liabilities
Current Liabilities
Bank overdraft 8,000
Trade payables: KK Ltd 2,000
Other 29,000 32,000
Total Liabilities 29,000 42,000
Total Equity and Liabilities 145,000 111,000

Answer 1

CONSOLIDATED ACCOUNT FOR THE GROUP AS AT 28TH FEBRUARY 2020:

Assets:
Non-Current Assets:
PPE - 90,000
Investments - 55,000
Total Non-Current Assets - 145,000

Current Assets:
Inventory - 16,000
Trade Receivable - 2,000
Other Current Assets - 21,000
Bank - 16,000
Total Current Assets - 55,000

Total Assets - 200,000

Equity and Liability:
Members' Interest and Reserves:
55,000 R1 Ordinary Shares - 55,000
85,000 R1 Ordinary Shares - 85,000
Retained Earnings:
KK Ltd - 31,000
Ash Ltd - 14,000
Total Members' Interest and Reserves - 185,000

Non-Current Liabilities: - 0

Current Liabilities:
Bank Overdraft - 8,000
Trade Payables:
KK Ltd - 2,000
Other - 29,000
Total Current Liabilities - 39,000

Total Equity and Liabilities - 224,000