FAC2602 Assignment 2 (COMPLETE ANSWERS) Semester 1 2026 - DUE April 2026; 100% Correct solutions and explanations.

FAC2602 Assignment 2 (COMPLETE ANSWERS) Semester 1 2026 - DUE April 2026; 100% Correct solutions and explanations. QUESTION 1 (32 marks) (64 minutes) Bean Ltd and Bag Ltd formed a group of companies through an acquisition of 80% interest in the ordinary shares of Bag Ltd on 30 April 2023. Bean Ltd purchased this controlling interest for a cash amount of R1 000 200. The financial year end of both companies is 31 May 2025. 1. The total equity at date of acquisition for Bag Ltd consisted of: Share capital (200 000 shares)………..………………………………………….....R600 000 Retained earnings……………………………………………………………………..R475 000 Revaluation surplus……………………………….…………………………………..R 89 000 On the date of purchase, it was determined that: All the assets and liabilities of Bag Ltd were measured at fair value. Each ordinary share carries one vote, and that voting rights alone determine control. The issued share capital of both companies remained unchanged since incorporation. It is the group’s policy to disclose goodwill at cost less impairment in the consolidated financial statements. Goodwill was not impaired in the current year. Bag Ltd had retained earnings amounting to R530 000 on 1 June 2024. 2. Since May 2023 the two companies grew larger and expanded their market share. Bean Ltd has set-up a skills hub in the rural areas to empower Bag Ltd’s employees with the latest irrigation technology. A total of R125 000 was paid during the current year, of which R90 000 was paid in advance for the year 2026, to Bean Ltd by Bag Ltd concerning the skills development workshops. Bean Ltd revalued a property at the end of current year, with a fair value amount of R415 000 to R540 000. Bag Ltd declared and paid dividends amounting to R225 000 at the end of the current year to all its ordinary shareholders. 3. The income and expenditure items in the statement of profit or loss and other comprehensive income for the year of the two companies are as follows: Bean Bag Ltd Ltd 113 300 (290 700) (170 000) 218 500 (372 000) (284 000) (191 700) (87 300) ? 0 ????? 805 200 R R Revenue …………………………………………………………. 2 850 000 1 900 000 Cost of sales……………………………………………………… (880 000) (570 000) Gross profit ............................................................................ Other income……...……………………………………………… Other expenses: Operating expenses………………………… Administration and depreciation………….. Profit before tax ................................................................... Income tax expense ............................................................... PROFIT FOR THE YEAR ..................................................... Other comprehensive income for the