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Tutorial Pack Solutions Introduction To Groups

This document is a tutorial pack for Financial Reporting III at Walter Sisulu University, focusing on group accounting concepts. It includes solutions to unseen questions, journal entries for various investment methods, and calculations for carrying amounts and impairments. Key topics covered include the equity method, fair value through profit or loss, and fair value through other comprehensive income.

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4 views3 pages

Tutorial Pack Solutions Introduction To Groups

This document is a tutorial pack for Financial Reporting III at Walter Sisulu University, focusing on group accounting concepts. It includes solutions to unseen questions, journal entries for various investment methods, and calculations for carrying amounts and impairments. Key topics covered include the equity method, fair value through profit or loss, and fair value through other comprehensive income.

Uploaded by

amahlesikhafungana5
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

WALTER SISULU UNIVERSITY

2025
FINANCIAL REPORTING III

(ACF37W0/ACC37W0)

Tutorial Pack
Introduction to
Groups
Week 7/8
Table of contents
 Question 1 Unseen question solution: Example 1 [Theory]
 Question 2 Unseen question solution: Example 5 [Theory]
QUESTION 1 SOLUTION

QUESTION 2 SOLUTION

QUESTION 6

1. Journal Entries with Workings (10 marks)


(a) Investment in Delta Ltd – Equity Method (4 marks)
Workings:
Share of profit = 30% × 200 000 = 60 000 [1 mark]
Dividends = 30% × 80 000 = 24 000 [1 mark]
Carrying amount before impairment = 300 000 + 60 000 – 24 000 = 336
000
Impairment = 336 000 – 320 000 = 16 000 [1 mark]

Journal Entries:
Dr Investment in Delta Ltd ................. 60 000
Cr Share of profit (P/L) ..................... 60 000

Dr Bank ............................................... 24 000


Cr Investment in Delta Ltd .............. 24 000

Dr Impairment loss (P/L) .............. 16 000


Cr Investment in Delta Ltd .............. 16 000 [1 mark]

(b) Investment in Zeta Ltd – FVTPL (2 marks)


Workings:
Fair value gain = 150 000 – 120 000 = 30 000 [1 mark]

Journal Entry:
Dr Investment in Zeta Ltd ............. 30 000
Cr Fair value gain (P/L) ................. 30 000 [1 mark]

(c) Investment in Sigma Ltd – FVOCI (2 marks)


Workings:
Fair value loss = 200 000 – 170 000 = 30 000 [1 mark]

Journal Entry:
Dr OCI (Equity reserve) ............... 30 000
Cr Investment in Sigma Ltd ........ 30 000 [1 mark]

(d) Investment in Theta Ltd – Cost Method (2 marks)


Workings:
Dividend income = 12 000 [1 mark]

Journal Entry:
Dr Bank ............................................... 12 000
Cr Dividend income (P/L) ............. 12 000 [1 mark]

2. Carrying Amounts (3 marks)


Delta Ltd = 320 000 [1 mark]
Zeta Ltd = 150 000 [1 mark]
Sigma Ltd = 170 000 [0.5 mark]
Theta Ltd = 100 000 [0.5 mark]

3. Impairment under Equity Method (2 marks)


- Entire carrying amount tested for impairment [1 mark]
- Loss recognised in profit or loss [0.5 mark]
- Reversal allowed if recoverable amount increases [0.5 mark]

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