On 1 July 2016, SIBABALWE LIMITED had 100,000 ordinary shares in Linathi Limited which had been acquired for cash at a fair value of CU340,000 on 15 September 2015. Transaction costs of CU10,000 were paid by Sibabalwe Limited on 15 September 2015. These shares were not designated as at fair value through profit or loss or acquired for speculative purposes. Sibabalwe Limited irrevocably elected at initial recognition to classify this investment as at fair value through other comprehensive income. Both companies are listed on the JSE Limited.
Sibabalwe Limited purchased a further 250,000 ordinary shares in Linathi Limited on 26 July 2016 at CU3,20 each. Brokerage was also paid to the stock brokers at 0,5% of the purchase price per share. Sibabalwe acquired these additional shares in Linathi Limited, in order to secure preferential supplies.
The following information in respect of Sibabalwe Limited is provided to you:
– The reporting date is 30 June.
– The balance of the retained earnings account on 1 July 2016 is CU135,000.
– Profit after tax for the year ended 30 June 2017 is CU225,000.
– Profit after tax for the year ended 30 June 2018 is CU190,000.
The closing price of an ordinary share in Linathi Limited was as follows:
– on 30 June 2016, CU3,50 per share;
– on 30 June 2017, CU3,60 per share;
– on 30 June 2018, CU3,40 per share.
REQUIRED
- Prepare the general journal entries (cash transactions included) of Sibabalwe Limited for the financial years ended 30 June 2016 to 30 June 2018 (inclusive). Narrations are not required.
- Prepare the following accounts in the general ledger of Sibabalwe Limited, properly closed off, for the financial years ended 30 June 20X7 and 30 June 2018: investment in Linathi Limited; retained earnings; and mark-to-market reserve on equity instruments.
- Present an extract from the statement of profit or loss and other comprehensive income of Sibabalwe Limited for the year ended 30 June 2018, in accordance with International Financial Reporting Standards.
- Present an extract from the statement of changes in equity of Sibabalwe Limited for the year ended 30 June 2018, in accordance with International Financial Reporting Standards.
🇿🇦 Sibabalwe means “the one who is blessed”.
🇿🇦 Linathi is derived from “Linathi igama le Nkosi”, meaning the Lord is with us
