The following is a summary of the balances in the records of Kwa Limited and its subsidiary Jomvu Limited
as at 31 March 2000.
Kwa Ltd Jomvu Ltd.
Sh. ‘000’ Sh. ‘000’
Property, plant and equipment at cost 250,000 220,000
7,500,000 ordinary shares in Jomvu Ltd. at cost. 165,000
6,000,000 preference shares in Jomvu Ltd. at cost 60,000
Sh.5,000,000 6% debentures of Jomvu Ltd. 5,000
Current assets 145,500 143,400
625,500 363,400
Authorized and issued capital, fully paid: Ordinary
shares of Sh.10 each. 300,000 100,000
7% non-cumulative preference shares of Sh.10 each. 80,000
General reserves 50,000 40,000
Profit and loss account 98,500 44,400
Provision for depreciation 60,000 30,000
6% debentures 20,000
Proposed dividends:
On ordinary shares 30,000 10,000
On preference shares 5,600
Debenture interest accrued 1,200
Trade payables 87,000 32,200
625,500 363,400
You ascertain the following:
1. Kwa Limited acquired the shares of Jomvu Limited, cum dividend on 31 March 1999.
2. The general reserve of Jomvu Limited was the same on 31 March 1999 as on 31 March 2000. The
balance on the profit and loss account of Jomvu Limited is made up as follows:
Sh. ‘000’
Balance on 31 March 1999 28,000
Net profit for period ended 31 March 2000 32,000
60,000
Less proposed dividends 15,600
44,400
3. The stock in trade of Jomvu Limited on 31 March 2000 included Sh.6 million in respect of goods purchased
from Kwa Limited. These goods had been sold by Kwa Limited to Jomvu Limited at such a price as to
give Kwa Limited a profit of 20% on the invoice price.
4. The balance on the profit and loss account of Jomvu Limited on 31 March 1999, is after providing for
preference dividend of Sh.5,600,000 and a proposed ordinary dividend of Sh.5,000,000 both of which were
subsequently paid and credited to the profit and loss account of Kwa Limited.
5. No entries have been made in the books of Kwa Limited in respect of the debentures interest due from,
or the proposed dividends of Jomvu Limited for the year ended 31 March 2000.
6. On 31 March 2000, the authorized and issued ordinary share capital of Jomvu Limited had been increased
by Sh.20 million by capitalizing part of the general reserve and issuing 2 million Sh.20 shares to the existing
shareholders in proportion to their existing holdings. The transaction has not yet been reflected in the
books of Kwa Limited or Jomvu Limited.
7. Group policy to amortize goodwill on consolidation over 5 years using the straight line method.
Required:
A consolidated balance sheet of Kwa and its subsidiary company Jomvu Limited as at 31 March 2000.
