UNIT 5: Business Combinations and Group Statements
TUTORIAL QUESTIONS
QUESTION 1
Charlie (Pty) Ltd bought 50 000 Class A shares in Delta (Pty) Ltd on 30 June 2019. The condensed
statements of financial position of the two companies as at 30 June 2019 were as follows:
Charlie (Pty) Ltd Delta (Pty) Ltd
ASSETS
Property, plant and equipment 120 000 200 000
Investment in Delta (Pty) Ltd 105 000 -
Inventory 102 500
Bank 22 500 10 000
350 000 210 000
EQUITY AND LIABILITIES
Share capital (Charlie = 100 000 Class A shares, 200 000 100 000
Delta = 50 000 Class A shares)
Retained earnings 50 000 30 000
Long term loans 100 000 80 000
350 000 210 000
REQUIRED:
1.1 Prepare the analysis of owner’s equity of Delta (Pty) Ltd for the Charlie Group as at 30 June 2019.
1.2 Prepare any pro-forma journal entries necessary to prepare the consolidated financial statements of
the Charlie Group as at 30 June 2019.
QUESTION 2
Echo (Pty) Ltd acquired 100 000 Class A shares in Foxtrot (Pty) Ltd on 31 December 2019. The two
companies had the following balances on 31 December 2019:
Echo Foxtrot
(Pty) Ltd (Pty) Ltd
Debits
Property, plant and equipment 75 800 133 900
Investment in Foxtrot (Pty) Ltd 110 000 -
Inventories 36 500 4 200
Bank 5 200 -
227 500 138 100
Credits
Share capital (Echo = 150 000 Class A shares, 150 000 100 000
Foxtrot = 100 000 Class A shares)
Retained earnings 62 200 8 800
Revaluation Reserve, Property 6 500 20 000
Trade and other payables 8 800 3 700
Bank overdraft - 5 600
227 500 138 100
REQUIRED:
2.1 Prepare the analysis of owner’s equity of Foxtrot (Pty) Ltd for the Echo Group as at 31 December
2019.
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2.2 Prepare any pro-forma journal entries necessary to prepare the consolidated financial statements of
the Echo Group as at 31 December 2019.
2.3 Prepare the consolidated statement of financial position for the Echo Group as at
31 December 2019. Comparatives are not required.
QUESTION 3
Golf (Pty) Ltd acquired 50 000 Class A shares in Hotel (Pty) Ltd on 30 September 2019. The following
represents the condensed statements of financial position of Golf (Pty) Ltd and Hotel (Pty) Ltd at
30 September 2019:
Golf (Pty) Ltd Hotel (Pty) Ltd
ASSETS
Property, plant and equipment 103 200 157 300
Unsecured loan - Golf (Pty) Ltd - 20 000
Investment in Hotel (Pty) Ltd 130 000 -
Inventory 44 000 9 500
Bank 50 000 6 000
327 200 192 800
EQUITY AND LIABILITIES
Share capital 200 000 100 000
(Golf = 100 000 Class A shares, Hotel = 50 000 Class A shares)
Non-distributable reserve: Revaluation of land and buildings - 50 000
Retained earnings 95 700 40 000
Interest bearing borrowing – Hotel (Pty) Ltd 20 000 -
Trade and other payables 11 500 2 800
327 200 192 800
REQUIRED:
3.1 Prepare the analysis of owner’s equity of Hotel (Pty) Ltd for the Golf Group as at 30 September
2019.
3.2 Prepare any pro-forma journal entries necessary to prepare the consolidated financial statements of
the Golf Group as at 30 September 2019.
3.3 Prepare the consolidated statement of financial position for the Golf Group as at 30 September
2019. Comparatives are not required.
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QUESTION 4
Impala (Pty) Ltd acquired 5 000 Class A shares in JuJu (Pty) Ltd on 30 September 2019. The following
represents the condensed statements of financial position of Impala (Pty) Ltd and JuJu (Pty) Ltd at
30 September 2019:
Impala (Pty) Ltd JuJu (Pty) Ltd
ASSETS
Property, plant and equipment 1 200 200 177 500
Investment in JuJu (Pty) Ltd 200 000 -
Inventory 145 000 9 500
Bank 55 300 6 000
1 600 500 193 000
EQUITY AND LIABILITIES
Share capital (Impala = 100 000 Class A shares, 1 000 000 100 000
JuJu = 5 000 Class A shares)
Retained earnings 95 000 50 000
Long term loan 20 000 -
Trade and other payables 485 500 43 000
1 600 500 193 000
The directors of Impala (Pty) Ltd determined that the property, plant and equipment of JuJu (Pty) Ltd
was undervalued by R42 500. This equipment is used in the production of inventory for sale.
REQUIRED:
4.1 Prepare the analysis of owner’s equity of JuJu (Pty) Ltd for the Impala Group as at 30 September
2019.
4.2 Prepare any pro-forma journal entries necessary to prepare the consolidated financial statements of
the Impala Group as at 30 September 2019.
4.3 Prepare the consolidated statement of financial position for the Impala Group as at 30 September
2019. Comparatives are not required.