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Question 1 On 2 July 2005, H Ltd. purchased the entire issued ordinary share capital of S Ltd. On this date, S Ltd. had a retained income balance of R4 000 and no general reserve. Any purchase difference is to be attributed to the fixed assets of S Ltd. On 30 June 2007, the trial balances of the two companies were as follows: H Ltd. S Ltd. R Share capital (R1 ordinary shares) General reserve Retained income Accumulated depreciation 40 000 20 000 10 000 5 000 34 000 10 000 6 000 R90 000 R35 000 Fixed assets at cost Investments in S Ltd. Net current assets 30 000 14 000 36 000 24 000 21 000 R90 000 R35 000 Included in the net current assets of both companies is a dividend due by S Ltd. to H Ltd. of R2 000. Note: Required Draw up a consolidated balance sheet of H Ltd. and subsidiary S Ltd. on 30 June 2007.

Question 1 On 2 July 2005, H Ltd. purchased the entire issued ordinary share capital of S Ltd. On this date, S Ltd. had a retained income balance of R4 000 and no general reserve. Any purchase difference is to be attributed to the fixed assets of S Ltd. On 30 June 2007, the trial balances of the two companies were as follows: H Ltd. S Ltd. R Share capital (R1 ordinary shares) General reserve Retained income Accumulated depreciation 40 000 20 000 10 000 5 000 34 000 10 000 6 000 R90 000 R35 000 Fixed assets at cost Investments in S Ltd. Net current assets 30 000 14 000 36 000 24 000 21 000 R90 000 R35 000 Included in the net current assets of both companies is a dividend due by S Ltd. to H Ltd. of R2 000. Note: Required Draw up a consolidated balance sheet of H Ltd. and subsidiary S Ltd. on 30 June 2007.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Financial Accounting II / © ICG / Page 54 Question 1 On 2 July 2005, H Ltd. purchased the entire issued ordinary share capital of S Ltd. On this date, S Ltd. had a retained income balance of R4 000 and no general reserve. Any purchase difference is to be attributed to the fixed assets of S Ltd. On 30 June 2007, the trial balances of the two companies were as follows: H Ltd. S Ltd. R R Share capital (R1 ordinary shares) General reserve Retained income Accumulated depreciation 40 000 20 000 10 000 5 000 34 000 10 000 6 000 R90 000 R35 000 Fixed assets at cost 30 000 36 000 14 000 Investments in S Ltd. Net current assets 24 000 21 000 R90 000 R35 000 Included in the net current assets of both companies is a dividend due by S Ltd. to H Ltd. of R2 000. Note: Required Draw up a consolidated balance sheet of H Ltd. and subsidiary S Ltd. on 30 June 2007. Question 2 H Ltd. bought all the shares in S Ltd. on 30 June 2004 when the retained income of S Ltd. was R8 000 and the general reserve was R12 000. The following list of balances appeared in the books of the two companies on 30 June 2007. H Ltd. S Ltd. R R Debits Land and buildings at cost Equipment at cost Investment in S Ltd. Stock Bank 60 000 28 000 44 000 24 000 80 000 48 000 24 000 60 000 28 000 R292 000 R104 000 Credits Share capital (ordinary R1 shares) General reserve Retained income Creditors Accumulated depreciation on equipment 120 000 48 000 88 000 20 000 20 000 18 000 52 000 10 000 12 000 8 000 R292 000 R104 000 Financial Accounting II / © ICG / Page 55
Transcribed Image Text:Financial Accounting II / © ICG / Page 54 Question 1 On 2 July 2005, H Ltd. purchased the entire issued ordinary share capital of S Ltd. On this date, S Ltd. had a retained income balance of R4 000 and no general reserve. Any purchase difference is to be attributed to the fixed assets of S Ltd. On 30 June 2007, the trial balances of the two companies were as follows: H Ltd. S Ltd. R R Share capital (R1 ordinary shares) General reserve Retained income Accumulated depreciation 40 000 20 000 10 000 5 000 34 000 10 000 6 000 R90 000 R35 000 Fixed assets at cost 30 000 36 000 14 000 Investments in S Ltd. Net current assets 24 000 21 000 R90 000 R35 000 Included in the net current assets of both companies is a dividend due by S Ltd. to H Ltd. of R2 000. Note: Required Draw up a consolidated balance sheet of H Ltd. and subsidiary S Ltd. on 30 June 2007. Question 2 H Ltd. bought all the shares in S Ltd. on 30 June 2004 when the retained income of S Ltd. was R8 000 and the general reserve was R12 000. The following list of balances appeared in the books of the two companies on 30 June 2007. H Ltd. S Ltd. R R Debits Land and buildings at cost Equipment at cost Investment in S Ltd. Stock Bank 60 000 28 000 44 000 24 000 80 000 48 000 24 000 60 000 28 000 R292 000 R104 000 Credits Share capital (ordinary R1 shares) General reserve Retained income Creditors Accumulated depreciation on equipment 120 000 48 000 88 000 20 000 20 000 18 000 52 000 10 000 12 000 8 000 R292 000 R104 000 Financial Accounting II / © ICG / Page 55
Cash price: RT 500 per set Deposit: Interest: 20% of cash price per set 20% per annum Instalments: 35 monthly payments of R54 and a final payment of R30. The cost price per set amounted to R900, and 200 sets were sold during the year ended 30 June 2006. Instalments totalling R64 800 were received. Profit is regarded as realised in the year of sale, but finance charges are written off on the basis of the ratio of instalments received to total instalments. Financial Accounting II / © ICG / Page 62 Required (a) Show the following accounts: instalment sales debtors; instalment sales trading account; and interest suspense account (b) Show how instalment sales debtors will be reflected in the balance sheet at 30 June 2006. Question 4 HP Sellers Ltd. sells TV sets under instalment-purchase agreements. The company credits its profit and loss account each financial year with the profit on deposits and instalments received. This is done by multiplying the gross profit percentage for a particular contract by the deposits and instalments received on that contract. The following transactions took place during the financial year ended 31 December 2007. Name of buyer Cost of TV Instalment- Deposit paid Instalments purchase price of TV set R 800 R 600 R 500 R 900 R1 000 sets paid R400 R150 R 80 R200 R100 R500 R200 Q R400 R150 R120 R R300 S R600 R700 R250 R300 T R's TV set was repossessed and sold for R350 cash. Show the instalment credit debtors' account, the instalment credit training account and the second-hand trading account in the books of HP Sellers Ltd. for the year ended 31 December 2007. Financial Accounting II / © ICG / Page 63
Transcribed Image Text:Cash price: RT 500 per set Deposit: Interest: 20% of cash price per set 20% per annum Instalments: 35 monthly payments of R54 and a final payment of R30. The cost price per set amounted to R900, and 200 sets were sold during the year ended 30 June 2006. Instalments totalling R64 800 were received. Profit is regarded as realised in the year of sale, but finance charges are written off on the basis of the ratio of instalments received to total instalments. Financial Accounting II / © ICG / Page 62 Required (a) Show the following accounts: instalment sales debtors; instalment sales trading account; and interest suspense account (b) Show how instalment sales debtors will be reflected in the balance sheet at 30 June 2006. Question 4 HP Sellers Ltd. sells TV sets under instalment-purchase agreements. The company credits its profit and loss account each financial year with the profit on deposits and instalments received. This is done by multiplying the gross profit percentage for a particular contract by the deposits and instalments received on that contract. The following transactions took place during the financial year ended 31 December 2007. Name of buyer Cost of TV Instalment- Deposit paid Instalments purchase price of TV set R 800 R 600 R 500 R 900 R1 000 sets paid R400 R150 R 80 R200 R100 R500 R200 Q R400 R150 R120 R R300 S R600 R700 R250 R300 T R's TV set was repossessed and sold for R350 cash. Show the instalment credit debtors' account, the instalment credit training account and the second-hand trading account in the books of HP Sellers Ltd. for the year ended 31 December 2007. Financial Accounting II / © ICG / Page 63
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