FAC3704 Assignment 2 of 2021

FAC3704 ASSIGNMENT 2 – SEMESTER 1 OF
2021
(a) Pro forma Consolidation Journal entries

DR CR
R R
Revenue (Mags Ltd) (P / L) 1 000 000
Cost of Sales (LWT Ltd) (P / L) 1 000 000
30 23 077
Retained Earnings (Mags Ltd) (SCE) (100 000 ∗ )
130
23 077
Cost of Sales (Mags Ltd) (P / L)
6 462
Income tax expense (P / L) (Mags Ltd) (23 077 ∗ 28%)
6 462
Retained Earnings (SCE) (Mags Ltd)
30
Cost of Sales (Mags Ltd) (P / L) (92 727 ∗ ) 21 399
130
Inventory (LWT Ltd) (SFP) 21 399

Deferred Tax (SFP) (21 399 ∗ 28%) 5 992
Income tax expense (Mags Ltd) (P / L) 5 992


(b) Pro forma consolidation journal entries

DR CR
R R
Revenue (LWT Ltd) (P / L) (50 000 ∗ 40%) 20 000
75 15 000
Cost of Sales (LWT Ltd) (P / L) (50 000 ∗ 100
∗ 40%)
25 5 000
Investment in Tyres Ltd (LWT Ltd) (SFP) (50 000 ∗ ∗ 40%)
100

Deferred Tax (SFP) (5 000 ∗ 28%) 1 400
Income Tax (P / L) 1 400


𝑺𝒉𝒂𝒓𝒆𝒔 𝑨𝒄𝒒𝒖𝒊𝒓𝒆𝒅
% Interest of LWT Ltd in Tyres Ltd = (𝑻𝒐𝒕𝒂𝒍 𝒔𝒉𝒂𝒓𝒆𝒔 𝒊𝒏 𝒂𝒔𝒔𝒐𝒄𝒊𝒂𝒕𝒆 ∗ 𝟏𝟎𝟎)

68 000
= (170 000 ∗ 100)

= 𝟒𝟎%