Emerald Company Limited is a real estate company with subsidiaries providing project management services, property management...

  

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Emerald Company Limited is a real estate company with subsidiaries providing project management services, property management services and financing services and it prepares consolidated financial statements with a 31 December year end. One of its subsidiaries Opal Company Limited provides property management services to commercial and residential properties. Emerald Company Limited owns 77% of the shares in Opal Company Limited and has a 31 December year end. As at 31 December 2021, the carrying value of Opal in Emerald's books was Kes 146,300,000. In the Consolidated financial statements goodwill in relation to Opal Company is Kes 25,000,000. On 30 June 2022 Emerald sells its entire stake to Pearl Company Limited at a consideration of Kes 750,000,000 payable in 2 instalments of Kes 400 million and Kes 350 million. Emerald incurs transaction costs of Kes 50m for the disposal of its stake in Opal. As at 30 June 2022, Opal Company Limited reported a net profit after tax of Kes 10,000,000. Summary balance sheet of Opal Company Limited as at 30 June is shown below:- Opal Company Limited Balance sheet as at 30 June 2022 Assets Non-current assets Property, plant, and equipment Deferred tax asset Intangible assets Total non- current assets Current assets Receivables & prepayments Current income tax recoverable Cash and cash equivalents Total current assets Total assets Equity Share Capital Share Premium Retained earnings Total Equity Kes'000 500,000,000 200,000,000 10,000,000 710,000,000 20,000,000 10,000,000 15,000,000 45,000,000 755,000,000 50,000,000 100,000,000 50,000,000 200,000,000 Liabilities Non-current liabilities Borrowings Lease liability Total non-current liabilities Current liabilities Payables and accruals Bank overdraft Due to related parties Total current liabilities Total liabilities 500,000,000 10,000,000 510,000,000 20,000,000 10,000,000 15,000,000 45,000,000 555,000,000 Please provide the following: a. The realised gain on disposal on 1 July 2022 at Company level and on Consolidation on 1 July 2022; 10 points b. The accounting entries that Emerald Company Limited would pass on 1 July 2022 to recognise the sale of shares to Pearl Company Limited; 10 points and c. The accounting entries that Emerald Company Limited would pass at consolidation on 1 July 2022 to recognise the sale of shares to Pearl Company Limited. 10 points Emerald Company Limited is a real estate company with subsidiaries providing project management services, property management services and financing services and it prepares consolidated financial statements with a 31 December year end. One of its subsidiaries Opal Company Limited provides property management services to commercial and residential properties. Emerald Company Limited owns 77% of the shares in Opal Company Limited and has a 31 December year end. As at 31 December 2021, the carrying value of Opal in Emerald's books was Kes 146,300,000. In the Consolidated financial statements goodwill in relation to Opal Company is Kes 25,000,000. On 30 June 2022 Emerald sells its entire stake to Pearl Company Limited at a consideration of Kes 750,000,000 payable in 2 instalments of Kes 400 million and Kes 350 million. Emerald incurs transaction costs of Kes 50m for the disposal of its stake in Opal. As at 30 June 2022, Opal Company Limited reported a net profit after tax of Kes 10,000,000. Summary balance sheet of Opal Company Limited as at 30 June is shown below:- Opal Company Limited Balance sheet as at 30 June 2022 Assets Non-current assets Property, plant, and equipment Deferred tax asset Intangible assets Total non- current assets Current assets Receivables & prepayments Current income tax recoverable Cash and cash equivalents Total current assets Total assets Equity Share Capital Share Premium Retained earnings Total Equity Kes'000 500,000,000 200,000,000 10,000,000 710,000,000 20,000,000 10,000,000 15,000,000 45,000,000 755,000,000 50,000,000 100,000,000 50,000,000 200,000,000 Liabilities Non-current liabilities Borrowings Lease liability Total non-current liabilities Current liabilities Payables and accruals Bank overdraft Due to related parties Total current liabilities Total liabilities 500,000,000 10,000,000 510,000,000 20,000,000 10,000,000 15,000,000 45,000,000 555,000,000 Please provide the following: a. The realised gain on disposal on 1 July 2022 at Company level and on Consolidation on 1 July 2022; 10 points b. The accounting entries that Emerald Company Limited would pass on 1 July 2022 to recognise the sale of shares to Pearl Company Limited; 10 points and c. The accounting entries that Emerald Company Limited would pass at consolidation on 1 July 2022 to recognise the sale of shares to Pearl Company Limited. 10 points

Answer rating: 100% (QA)

a Realized gain on disposal on 1 July 2022 at Company level and on Consolidation on 1 July 2022 At C... View the full answer