QUESTION A Conditions which could indicate the existence of significant influence  Representation on the board of directors or equivalent governing body of the investee.  Participation in policy – making processes, including participation in decisions about dividend or other distributions.  Material transactions between the investor & the investee.  Interchange of managerial personnel; and  Provision of essential technical information. QUESTION B Journal Entries DR CR Retained earnings – Beginning of year (SCE) 1 425,00 Share of profit of associate (P / L) 1 425,00 Elimination of unrealized profit in opening inventories of Thusanang Ltd (28 500 x 20% x 25%) Share of Profit (P / L) 399,00 Retained earnings – Beginning of year (SCE) 399,00 Tax implication of unrealized profit in opening inventories of Thusanang Ltd (28% x 1425) Share of Profit of associate (P / L) 1 875,00 Inventory (Thusanang) (SFP) 1 875,00 Elimination of unrealized profit in closing inventories of Thusanang Ltd (37 500 x 20% x 25%) Deferred Tax (SFP) 525,00 Downloaded by: FreeDocument | kahorotechnologies@gmail.com Distribution of this document is illegal Stuvia.com - The Marketplace to Buy and Sell your Study Material Disclaimer Extreme care has been used to create this document, however the contents are provided “as is” without any representations or warranties, express or implied. This document is to be used for comparison, research and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any form or by any means without prior written permission from the author. Share of profit of associate (P / L) 525,00 Tax implication of unrealized profit in closing inventories of Thusanang Ltd (1 875 x 28%) Profit on sale of land (P / L) 11 413,00 Investment in associate (SFP) 11 413,00 Elimination of unrealized profit on the sale of land (250 000 − 217 392) x 35%] Deferred Tax (SFP) 2 557,00 Income tax expense (P / L) 2 557,00 Tax implication of unrealised profit on the sale of land (11 413 x 80% x 28%) Calculations % Interest of Thusanang in Kgotso Ltd = 75 000/300 000 = 25% % Interest of Thusanang in Lethabo Ltd = 175 000/500 000 = 35% QUESTION C Statement of Financial Position as at 31 December 2020 ASSETS Non – Current Assets 695 006,00 Property, plant and equipment 460 153,00 Investment in associate 154 671,00 Investment in joint venture 80 182,00 Current Assets 475 785,00 Inventories (260 000 − (37 500 x 20% x 25%)) 258 125,00 Trade and Other Receivables 156 000,00 Cash and cash equivalents 61 660,00 1 170 791,00 Calculations Analysis of the owners’ equity of Lethabo Ltd Downloaded by: FreeDocument | kahorotechnologies@gmail.com Distribution of this document is illegal Stuvia.com - The Marketplace to Buy and Sell your Study Material Disclaimer Extreme care has been used to create this document, however the contents are provided “as is” without any representations or warranties, express or implied. This document is to be used for comparison, research and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any form or by any means without prior written permission from the author. Total Thusanang Ltd (35%) Carrying Amount At Since At Acquisition Share Capital 250 000,00 87 500,00 Retained earnings (40 000 + (199 996 x 3/12 ) 89 999,00 31 500,00 339 999,00 119 000,00 Investment in Lethabo Ltd - 100 000,00 100 000,00 Excess of fair value over cost 19 000,00 Current Year 71 499,00 71 499,00 Profit for the year (199 996 x 9/12 ) 149 997,00 52 499,00 Excess of fair value over cost 19 000,00 Dividends paid - 22 839,00 - 7 994,00 - 7 994,00 467 157,00 63 505,00 163 505,00 Unrealised profit on sale of land ((250 000 − 217 392) x 35% x 77,4%) - 8 834,00 154 671,00 Analysis of the owners’ equity of Kgotso Ltd Total Thusanang Ltd (25%) Carrying Amount At Since At Acquisition Share Capital 150 000,00 37 500,00 Retained earnings 52 600,00 13 150,00 202 600,00 50 650,00 Equity represented by goodwill 350,00 Investment in Kgotso Ltd 51 000,00 51 000,00 Since Acquisition Retained Earnings 45 896,00 11 474,00 Given (102 600 − 52 600) 50 000,00 12 500,00 12 500,00 Downloaded by: FreeDocument | kahorotechnologies@gmail.com Distribution of this document is illegal Stuvia.com - The Marketplace to Buy and Sell your Study Material Disclaimer Extreme care has been used to create this document, however the contents are provided “as is” without any representations or warranties, express or implied. This document is to be used for comparison, research and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any form or by any means without prior written permission from the author. Unrealised profit in opening inventory (28 500 x 20% x 72%) - 4 104,00 - 1 026,00 Current Year Profit for the year 78 033,00 19 508,00 Given 79 329,00 19 832,00 19 832,00 Realisation of opening inventory 4 104,00 1 026,00 Unrealised profit in closing inventory (37 500 x 20% x 72%) - 5 400,00 - 1 350,00 Dividends paid - 12 600,00 - 3 150,00 - 3 150,00 313 929,00 27 832,00 80 182,00