ANDRIES LIMITED acquired investments in two companies, Daan Limited and Nandipha Limited for strategic purposes. These companies are major suppliers of raw materials to Andries Limited. Both Nandipha Limited and Daan Limited are listed on the JSE Limited under the chemicals sector. The shares were all purchased on 18 May 2013.
The investments in Daan Limited and Nandipha Limited were not designated as at fair value through profit or loss or acquired for speculative purposes. Andries Limited irrevocably elected at initial recognition to classify these investments as at fair value through other comprehensive income.
Andries Limited’s reporting date is 28 February.
The following information relates to the investments in Daan Limited and Nandipha Limited:
1. Details of investment:
| Market price per share on 28 February | |||||
|
|
Number of shares held |
Cost price per share (at fair value) |
2014 |
2015 |
2016 |
|
|
CU |
CU |
CU |
CU |
CU |
|
Daan Limited |
100,000 |
1,40 |
1,55 |
1,65 |
1,50 |
|
Nandipha Limited |
200,000 |
3,00 |
3,20 |
3,15 |
3,05 |
2. On 10 March 2016, Andries Limited sold all the shares it held in both Daan Limited and Nandipha Limited as other suppliers of the raw materials gained access to the markets at competitive prices. It is the accounting policy of Andries Limited to recycle any related cumulative balance in the mark-to-market reserve on equity instruments on sale of the investments or part thereof.
3. The shares in Daan Limited were sold for cash at a fair value of CU155,000 whilst the shares in Nandipha Limited were sold for cash at a fair value of CU2,00 each.
4. Assume that the profit for the year ended 28 February 2017 amounted to CU445,000 and that the balance f the retained earnings account on 1 March 2016 was CU685,000. Any decline in the value of the shares is of a temporary nature.
REQUIRED
- Prepare the investment accounts in the general ledger of Andries Limited for the period 1 March 2014 to 10 March 2016 (inclusive) to account for the above investment transactions.
- Present the retained earnings and mark-to-market reserve on equity instruments columns of the statement of changes in equity of Andries Limited for the year ended 28 February 2017 based on the information provided, in accordance with International Financial Reporting Standards. Comparative amounts are not required.
🇿🇦 Andries is Dutch version of the name Andrew and means ‘man’.
🇿🇦 Daan is a male names meaning ‘God is my Judge’.
🇿🇦 Nandipha means “Gift of God”.
