You are the financial director of Hangala Ltd (“Hangala”), the parent company of the Hangalagroup that mainly provides internet services across the country in the form of internet cafés,servicing of electronic equipment and selling of electronic devices like computers, laptops,tablets and cellular phones. Hangala Ltd reporting period ends on 31 December.Hangala Ltd is a Namibian company, listed on the Namibian Stock Exchange. All companieswithin the group’s reporting date is 31 December.Extract of the trial balances of the group’s companies listed below:Trial balance 31 December 2020 Hangala PepperDr / (Cr) Dr / (Cr)Ordinary share capital (1 250 000) (850 000)Retained earnings - 1 January 2020 (1 900 500) (315 000)Property, plant and equipment 1 670 000 247 000Investment in Pepper at cost 885 000 -Inventory 528 073 890 000Debtors 121 527 140 500Creditors (20 000) (75 000)Bank and cash 967 060 202 000Revenue (7 574 500) (2 585 000)Cost of sales 6 180 000 2 000 000Other income (150 500) (60 500)Other operating expenses 154 500 76 000Income tax expense 389 340 115 000Dividend declared and paid 31 December 2020 - 215 000Subtotal of Profit for the year (1 001 160) (454 500)Pepper (Pty) Ltd (“Pepper”)1. Hangala acquired its 60% shareholding in Pepper, an extremely profitable manufacturerof an electronic tablet called “The Power Pepper”. In the last couple of years there was anincreased demand for this product in the market. Pepper also uses some of its own tabletsto rent out to students at various universities and colleges.2. Hangala acquired its interest on 1 January 2019 when the equity of Pepper consisted ofthe following balances: Share Capital: N$ 850 000 Retained Earnings: N$ 280 000-3. On 1 January 2020 Hangala bought used tablets with a carrying value and tax base ofN$ 300 000. (Original cost price N$ 500 000) for N$ 200 000 from Pepper. Hangala will use these tablets in their internet cafés for the public to use for Facebookemails etc. These tablets are classified as equipment in the records of Hangala. The used tablets were also classified as equipment in the records of Pepper.7 Depreciation on equipment is provided according to the straight-line method. Theremaining useful life for Hangala for the equipment is 3 years.Additional Information Other income includes dividends received. Depreciation is part of operating expenses. Hangala elected to measure any non-controlling interests in Pepper at its proportionalshare of Pepper identifiable net assets at acquisition date. Assume that the identifiable assets acquired and the liabilities assumed at acquisition dateare shown at their acquisition-date fair values, as determined in terms of IFRS 3, Businesscombinations Hangala classifies the equity investments in Pepper at cost in accordance with IFRS9,Financial instruments The company tax rate is 32%. Please note that no deferred tax calculations are required.Required:a) Prepare all the pro-forma consolidation journal entries to incorporate Pepper (Pty) Ltd intothe Hangala Ltd group for the year ended 31 December 2020. Journal narrations are notrequired. (18)b) Prepare the Consolidated Statement of Profit and Loss and Other Comprehensive Incomefor the year ended 31 December 2020 in accordance with International FinancialReporting Standards (IFRS). Notes and comparative figures are not required. One (1)mark will be allocated for Presentation Skills. (13)c) Calculate the carrying amount of the Property, plant and equipment line item to beincluded in the Consolidated Statement of Financial Position as at 31 December 2020 inaccordance with IFRS. (3)

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a The following journal entries would be made in order to incorporate Pepper Pty Ltd into the Hangal... View the full answer