On 1 July 2018, Wakanda Ltd acquired 75% of Forever Ltd’s equity shares when the retained earnings of Forever Ltd were N$15,000. The summarised financial statements of the two companies for the 2020 financial year are shown below:

Statements of Financial Position as at 30 June 2020

	Wakanda Ltd N$	Forever Ltd N$
Assets
Non-Current Assets
Property, Plant & Equipment	910 000	50 000
Investment in Forever Ltd (75 000 shares at cost)	90 000	-
Current Assets
Trade and other receivables	350 000	45 000
Inventories	100 000	20 000
Bank	50 000	15 000
TOTAL ASSETS	1 500 000	130 000
EQUITY AND LIABILITIES
Equity
Share Capital	350 000	100 000
Retained earnings	1 000 000	20 600
Current Liabilities
Trade and other payables	150 000	9 400
TOTAL EQUITY AND LIABILITIES	1 500 000	130 000

EXTRACTS FROM THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020

	Wakanda Ltd N$	Forever Ltd N$
Sales	968 200	121 000
Cost of Sales	(650 100)	(66 000)
Gross Profit	318 100	55 000
Dividend Received	7 500	-
Operating Expenses	(100 600)	(35 000)
Profit Before Tax	225 000	20 000
Income Tax Expenses	(72 000)	(6 400)
PROFIT FOR THE YEAR	153 000	13 600
Other Comprehensive Income	-	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	153 000	13 600

EXTRACTS FROM THE STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020

	Retained earnings	Retained earnings
	Wakanda Ltd N$	Forever Ltd N$
Opening Balance - 1 July 2019	900 000	17 000
Profit for the year	153 000	13 600
Other Comprehensive Income for the year	-	-
Ordinary Dividend	(53 000)	(10 000)
Closing Balance - 30 June 2020	1 000 000	20 600

Additional notes •

Assume that the identifiable assets acquired and liabilities assumed at acquisition date are shown at their acquisition-date fair values.

• Wakanda Ltd elected to measure non-controlling interests in an acquiree at their fair value at acquisition date. The fair value of non-controlling interests was determined to be N$30,000.

• Wakanda Ltd recognises the equity investment in Forever Ltd in its separate financial statements using the cost method.

• Ignore tax implications.

Required:

For the year ending 30 June 2020 prepare the following for Wakanda Ltd group:

a) Discuss the three elements of control in terms of IFRS 10. (3)

b) Pro-forma journals necessary to prepare the consolidated financial statements. (12) (Journal narrations are not required)

c) The consolidated statement of profit or loss and other comprehensive income. (9)

d) The consolidated statement of financial position. (16)

NB. Show all your workings

Answer rating: 100% (QA)

Answer Explanation 1 As per IFRS10 control is been identified as the sole basis for consolidation an... View the full answer