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.
Required: Prepare a consolidated account for the group that ended 28th February 2020.
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
CONSOLIDATED ACCOUNT FOR THE GROUP ENDING 28 FEBRUARY 2020
Assets:
Non-Current Assets:
PPE: 95,000 (35,000 + 60,000)
Investments in Ash Ltd: 55,000
Current Assets:
Inventory: 43,000 (16,000 + 27,000)
Trade receivable: 2,000
Other: 45,000 (21,000 + 24,000)
Bank: 16,000
Total Assets: 240,000 (90,000 + 60,000 + 55,000 + 35,000)
Equity and Liability:
Members' interest and reserves: 185,000 (116,000 + 69,000)
Retained earnings: 45,000 (31,000 + 14,000)
Non-Current Liabilities: -
Current Liabilities:
Bank overdraft: 8,000
Trade payables: 2,000 (KK Ltd)
Other: 61,000 (29,000 + 32,000)
Total Liabilities: 71,000 (8,000 + 2,000 + 61,000)
Total Equity and Liabilities: 240,000 (185,000 + 45,000 + 71,000)
Therefore, the consolidated accounts for the group ending 28th February 2020 show total assets of R240,000 and total liabilities of R71,000. The members' interest and reserves of the group is R185,000, and the retained earnings are R45,000.
To prepare the consolidated account for the group that ended 28th February 2020, we need to combine the financial information of both KK Ltd and Ash Ltd. Here are the steps to do so:
Step 1: Combine the non-current assets of both companies:
KK Ltd (R) - Non-Current Assets: 90,000
Ash Ltd (R) - Non-Current Assets: 60,000
Total Non-Current Assets = 90,000 + 60,000 = 150,000
Step 2: Combine the current assets of both companies.
KK Ltd (R) - Current Assets: 55,000
Ash Ltd (R) - Current Assets: 51,000
Total Current Assets = 55,000 + 51,000 = 106,000
Step 3: Combine the equity and reserves of both companies.
KK Ltd (R) - Members' Interest and Reserves: 116,000
Ash Ltd (R) - Members' Interest and Reserves: 69,000
Total Members' Interest and Reserves = 116,000 + 69,000 = 185,000
Step 4: Combine the non-current liabilities of both companies.
KK Ltd (R) - Non-Current Liabilities: 0
Ash Ltd (R) - Non-Current Liabilities: 0
Total Non-Current Liabilities = 0
Step 5: Combine the current liabilities of both companies.
KK Ltd (R) - Current Liabilities: 0
Ash Ltd (R) - Current Liabilities: 42,000
Total Current Liabilities = 42,000
Step 6: Calculate the consolidated Equity and Liabilities subtotal.
Total Equities and Reserves = Total Members' Interest and Reserves = 185,000
Total Liabilities = Total Non-Current Liabilities + Total Current Liabilities
= 0 + 42,000
= 42,000
Total Equity and Liabilities = Total Equities and Reserves + Total Liabilities
= 185,000 + 42,000
= 227,000
Therefore, the consolidated account for the group that ended 28th February 2020 is as follows:
Consolidated Account (in R)
Total Non-Current Assets: 150,000
Total Current Assets: 106,000
Total Assets: 256,000
Total Equity and Reserves: 185,000
Total Current Liabilities: 42,000
Total Liabilities: 42,000
Total Equity and Liabilities: 227,000