KK Ltd regularly sells goods to its wholly-owned subsidiary company Ash Ltd, which it has owned since Ash Ltd.'s incorporation. The statement of financial position of the two companies on 28th February 2020 is given below.
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2020
KK Ltd (R) Ash Ltd (R)
Assets
Non-Current Assets 90,000 60,000
PPE 35,000 60,000
Investments in 55,000 shares in Ash Ltd at cost 55,000
Current Assets 55,000 51,000
Inventory 16,000 27,000
Trade receivable: Ash Ltd 2,000
Other 21,000 24,000
Bank 16,000
Total Assets 145,000 111,000
Equity and Liability
Members' interest and reserves 116,000 69,000
55,000 R1 ordinary shares 55,000
85,000 R1 ordinary shares 85,000
Retained earnings 31,000 14,000
Non-Current Liabilities
Current Liabilities
Bank overdraft 8,000
Trade payables: KK Ltd 2,000
Other 29,000 32,000
Total Liabilities 29,000 42,000
Total Equity and Liabilities 145,000 111,000
From the given information, we can see that KK Ltd has non-current assets of 90,000 R and current assets of 55,000 R, for a total asset value of 145,000 R. Ash Ltd has non-current assets of 60,000 R and current assets of 51,000 R, for a total asset value of 111,000 R.
In terms of equity and liability, KK Ltd has members' interest and reserves of 116,000 R, including 55,000 R1 ordinary shares and retained earnings of 31,000 R. Ash Ltd has members' interest and reserves of 69,000 R, including 85,000 R1 ordinary shares and retained earnings of 14,000 R.
KK Ltd has non-current liabilities of 0 R and current liabilities of 29,000 R, including a bank overdraft of 8,000 R and trade payables to KK Ltd of 2,000 R. Ash Ltd has non-current liabilities of 0 R and current liabilities of 42,000 R, including other trade payables of 32,000 R.
The total equity and liabilities for KK Ltd is 145,000 R and for Ash Ltd is 111,000 R.
Based on the given information, we can analyze the statement of financial position of KK Ltd and Ash Ltd as at 28th February 2020 and identify key aspects:
1. Non-Current Assets:
- KK Ltd has non-current assets worth R90,000, which consists mainly of property, plant, and equipment (PPE) valued at R35,000.
- Ash Ltd has non-current assets valued at R60,000, primarily composed of its investment in 55,000 shares of Ash Ltd that it holds at cost.
2. Current Assets:
- KK Ltd has current assets totaling R55,000, which includes inventory worth R16,000, trade receivables from Ash Ltd amounting to R2,000, and other current assets worth R21,000.
- Ash Ltd has current assets valued at R51,000, including inventory of R27,000 and other current assets amounting to R24,000.
3. Equity and Liabilities:
- The members' interest and reserves in KK Ltd amount to R116,000, which consists of 55,000 R1 ordinary shares and retained earnings of R31,000.
- The members' interest and reserves in Ash Ltd total R69,000, comprising 85,000 R1 ordinary shares and retained earnings of R14,000.
- KK Ltd has non-current liabilities amounting to R29,000. The details of its current liabilities include a bank overdraft worth R8,000 and trade payables to KK Ltd amounting to R2,000.
- Ash Ltd has current liabilities totaling R42,000. These liabilities include a bank overdraft of R8,000 and trade payables to Ash Ltd's other entities worth R32,000.
Please note that the given figures are provided in Rand (R).