Pudding Ltd $(\text{'}$Pudding$"),$ Eggie Ltd $("$Eggie$")$ and Sweetie Ltd $(\text{'}$Sweetie$")$ are three companies in the food industry, all of whom have a February year$-$end. The following are abridged trial balances of the three entities for the financial year ended $29$ February $2024$:

Abridged trial balance Pud Swee DR CR DR CR DR CR Ordinary share capital $($R$1$ each$)20000010000050000$ Retained earnings: $1$ March $20231422600694000742165$ Trade and other payables $293000321000241000$ Equipment $($at carrying value$)670000436500347200$ Trade and other receivables $443000356000420575$ Inventory $536000451000384000$ Investment in Eggie Ltd $($at cost$)465000--$ Investment in Sweetie Ltd $($at cost$)350500--$ Deferred tax liability $634504455040500$ Sales $420000020000001000000$ Cost of Sales $30000001600000800000$ Other expenses $53500028500093000$ Income tax expense $1795503105028890617905061790503159550315955020736652073665$

$1.$ Investment in Eggie:

On $1$ March $2022,$ Pudding acquired a $75\%$ controlling interest in Eggie. At the acquisition date, Eggie had a share capital of R$100000$ and retained earnings of R$510000.$

Eggie's identifiable net assets were considered to be fairly valued at acquisition.

$2.$ Eggie sells inventory to Pudding:

Eggie started selling inventory to Pudding from the acquisition date at its $($Eggie$\text{'}$s$)$

cost plus $25\%.$

Pudding then uses this inventory purchased from Eggie as part of its own inventory

and on$-$sells it to third parties. Inventory sales to Pudding totalled R$560000$ in Eggie's financial records for the

$2024$ financial year.

As part of the total inventory balance in its financial records, Pudding had an opening inventory of R$55000$ and a closing inventory of R$42000$ which were specifically purchased from Eggie. The remainder of the inventory balances relates to purchases from third parties.

$3.$ Investment in Sweetie:

On $1$ March $2022,$ Pudding also acquired a $60\%$ controlling interest in Sweetie. At the acquisition date, Sweetie had share capital of R$50000$ and retained earnings of R$525000.$

Sweetie's identifiable net assets were considered to be fairly valued at acquisition.

$4.$ Pudding sells inventory to Sweetie:

Pudding started selling inventory to Sweetie from the acquisition date at its $($Pudding$\text{'}$s$)$ cost plus $40\%.$

Sweetie then uses this inventory purchased from Pudding as part of its own

inventory and on$-$sells it to third parties.

Sweetie reflected that as part of their opening inventory in its financial records at $1$

March $2023,$ there was inventory of R$71400$ purchased specifically from Pudding.

During the $2024$ financial year, Pudding sold inventory to Sweetie. The inventory

had a cost to Pudding of R$180000.$ Exactly half of this inventory was still on hand as part of Sweetie's closing inventory at the financial year ended $29$ February $2024.$

The remainder of Sweetie's inventory balance relates to purchases from third parties.

$5.$ Pudding Ltd sold equipment to Sweetie Ltd:

On $29$ February $2024,$ Pudding sold equipment to Sweetie for R$11000$ when the

equipment had:

A carrying value of R$14000$

Fair value less cost of disposal of R$12000$

Value in use R$10000$

Additional information:

Pudding accounts for investments in subsidiaries at cost in its separate financial statements.

All the opening inventory of each entity in the group formed part of their sales for the year.

Pudding elected to measure the non$-$controlling interests of Eggie and Sweetie at

its proportionate share of the identifiable net assets of the investee at the acquisition date $($partial goodwill method$)$

Assume a normal Income Tax rate of $27\%.$

Ignore Value Added Tax $($VAT$)$ and Dividend Tax.

None of the companies are considered share traders for income tax purposes or investment entities as defined in IFRS $10$ Consolidated Financial Statements.

$1\mathrm{.}1$ Discuss the difference between a 'horizontal group' and a 'vertical group' and indicate which of the two structures is represented by the Pudding Ltd group.

$1\mathrm{.}2$ Prepare the pro forma general journal entries necessary to account for Sweetie Ltd only in the Consolidated Annual Financial Statements of the Pudding Ltd

Group for the financial year ended $29$ February $2024.$

Be specific regarding which financial statement and which entity the journal relates to$.$ You can write it in brackets after the account

description e$.$g$.$ Income tax $($P$/$L$)($Sweetie Ltd$).$

Show all workings and reference accordingly.

Journal narrations and dates are not required.

Round off to the nearest Rand, where applicable.

$1\mathrm{.}3$ Prepare only the non$-$controlling interest $($NCI$)$ column of the Statement of Changes in Equity of the Pudding Ltd Group for the financial year ended $29$ February $2024.$

Show all workings and reference accordingly.

Use and reference any relevant workings from $1\mathrm{.}2.$

Round off to the nearest Rand, where applicable.