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FAC2602 ASSESSMENT 4 SEM 2 OF 2024 EXPECTED SOLUTIONS
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THIS DOCUMENT CONTAINS FAC2602 ASSESSMENT 4 SEM 2 OF 2024 EXPECTED SOLUTIONS.USE IT CORRECTLY AS A GUIDE
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2.1. Accounting Treatment of Transactions Affecting Profit (20 marks)You need to:
Eliminate intercompany transactions affecting profit (such as sales and dividends).
Adjust for the impact of unrealized profits (e.g., in closing inventory).
Account for the depreciation of machinery sold by Credo Ltd to Crotia Ltd.
Transactions to Consider:
Inventory Purchase: Credo Ltd bought herbs and spices from Crotia Ltd at a markup. You
need to adjust for unrealized profit on the closing inventory of R75,000.
Machinery Purchase: Crotia Ltd bought machinery from Credo Ltd, with a profit element of
R650,000. This profit needs to be eliminated and adjusted for depreciation
Analysis of owners equity in Credo
AT SINCE
Total 60% 40%
Share capital 2,100,000.00 1,260,000.00 840,000.00
Retained Earnings 339,500.00 203,700.00 135,800.00
Revaluation surplus 375,000.00 225,000.00 150,000.00
2,814,500.00 1,688,700.00 1,125,800.00
Goodwill 261,300.00 261,300.00
Purchase consideration & NCI 3,075,800.00 1,950,000.00 1,125,800.00
, Since acquisition •
To beginning of current year 1,376,816.67 963,771.67 413,045.00
Retained earnings(2550000-760000) 201,400.00
Revaluation surplus -
Depreciation on -
Arrear pref dividend
Unrealised profit in opening
inventory (20,000.00)
Acc dpn on unrealised profit -
Revaluation surplus 0 -
Current year
PROFIT FOR THE YEAR 600,416.67 360,250.00 240,166.67
Profit for the year 1,245,000.00
Unrealised profit on sale of (650,000.00)
unrealised profit in dpn(180000-15000)*0.2 5,416.67
Dividend pref 59,500.00 35700 23,800.00
Dividend ordinary 135,000.00 81,000.00 54,000.00
a 1)
Dr Cr Nci
Share capital – ordinary shares 2,100,000.00
Retained earnings 339,500.00
Revaluation 375,000.00
Goodwill 261,300.00
Investment in G Ltd 1,950,000.00
Non-controlling interests 1,125,800.00
Elimination of owners' equity at acquisition
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