QUESTION $1(25$ marks$)$ You have been presented with the below Statement of Financial Position obtained from the annual financial statements of Bree$$s Beauty Ltd$,$Bree$$s Beauty$$ as at $30$ June $2025.$ Bree$$s Beauty Ltd Statement of Financial Position as at $30$ June $20252025$ R ASSETS Non$-$current assets $1949000$ Vehicles $1507000$ Investments $442000$ Current assets $950000$ Inventory $525000$ Bank $425000$ TOTAL ASSETS $2899000$ EQUITY AND LIABILITIES Equity $2554000$ Stated share capital $1500000$ Retained earnings $1008480$ Mark$-$to$-$market reserve $45520$ LIABILITIES Current liabilities $345000$ Trade payables $345000$ TOTAL EQUITY AND LIABILITIES $2899000$ The directors of Mistress of Makeup Ltd $$Mistress of Makeup$$ were considering two options to invest in Bree$$s Beauty. After careful consideration, the directors opted to purchase the shares $($selected option $1).$ ANNEXURE F: FORMATIVE ASSESSMENT $166$ HFAC$331-1-$Jul$-$Dec$2025-$FA$1-$SK$-$V$4-14072025$ Option $1$: Acquisition of Bree$$s Beauty$$s shares On $30$ June $2025,100\%$ of the stated ordinary share capital of Bree$$s Beauty was acquired by Mistress of Makeup from the previous shareholder, Concealerz Ltd$,$Concealerz$.$ The consideration for the $100\%$ shareholding was paid for as follows: $$ Land that had a cost of R$250000$ was transferred to Concealerz. The land had a fair value of R$340000$ on $30$ June $2025.$ The transfer was formally registered on $15$ July $2025$ when the fair value of the land was R$350000.$ Four cash instalment payments of R$600000$ each paid annually on $30$ June each year starting on $30$ June $2025.$ A cash payment of R$120000$ paid on $30$ June $2025,$ which includes R$33000$ to reimburse Concealerz for legal consulting fees relating to the acquisition, paid by Concealerz on behalf of Mistress of Makeup. The identifiable assets and liabilities of Bree$$s Beauty were considered to be fairly valued at the date of acquisition. Option $2$: Direct acquisition of the net assets in Bree$$s Beauty Mistress of Makeup also had the option to directly purchase the net assets of Bree$$s Beauty on $30$ June $2025$ in a transaction that would have qualified as a business combination in terms of IFRS $3.$ If this option were to be selected, the consideration for the net assets would have been paid by Mistress of Makeup issuing a minority stake of $25000$ shares in their own company. The Mistress of Makeup shares had a fair value of R$100\mathrm{.}16$ each on $30$ June $2025$ and R$100\mathrm{.}25$ each on $10$ July $2025,$ when it would have been issued. Additional information: $$ The discount rate applicable to both entities is $11\mathrm{.}55\%$ per annum $($p$.$a$.)$ There were no transactions on $30$ June $2025$ between the preparation of the given annual financial statements and the acquisition of Bree$$s Beauty Ltd$.$ Mistress of Makeup recognises investments in subsidiaries at cost in accordance with IAS $27\mathrm{.}10($a$)$ in its separate financial statements. $$ Ignore all taxes. ANNEXURE F: FORMATIVE ASSESSMENT $167$ HFAC$331-1$