sheet of Mashego Limited showed the following balances at
30 April 2015:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
R450 000
R120 000
R240.000
R25 000
The vear-end date for Mamagau Limited is on 30 April of every year. During the year ended 30 April 2016 Mashego Limited reported an after tax profit of R120 000. The directors of Mashego Limited declared an ordinary dividend of R20 000 but not yet paid at reporting date. Mamagau Limited applies equity accounting method for its associates and joint ventures.
)
What is the portion of Mamagau Limited in the equity of Mashego Limited as at the acquisition date on 30 April
2015? Select one:
O a. R305 000
© b. R160 000
O c. R152 500
O d. R470 000
To determine the portion of Mamagau Limited in the equity of Mashego Limited as at the acquisition date on 30 April 2015, we need to calculate the net assets of Mashego Limited.
Net assets = Non-current assets + Current assets - Non-current liabilities - Current liabilities
Net assets = R450,000 + R120,000 - R240,000 - R25,000
Net assets = R305,000
Since Mamagau Limited applies equity accounting method for its associates and joint ventures, its portion in the equity of Mashego Limited would be equal to the net assets of Mashego Limited. Therefore, the portion of Mamagau Limited in the equity of Mashego Limited as at the acquisition date on 30 April 2015 is R305,000.
Explanation: Option a is correct.