On 1 January 2021, A Limited acquired 80% of B Limited for N$3,6 million. At acquisition date, the following information was relevant for B limited
B Limited was a lessee under an operating lease agreement in terms of which it was required to pay an annual rental of N$150 000 on 31 December each year for the remaining three years of the lease agreement. The market rentals for a similar property were N$200 000 per annum. An appropriate discount rate is 15%.
B had a radio license for southern Namibia which had a fair value of N$ 115,000 at the acquisition date. However, since A is completely in a different sector, they intend to discontinue that line of B business immediately after the acquisition. The license had been acquired for free from the government in an effort to promote local languages in the region.
. At the date of acquisition, B had a present obligation of N$ 2.5 million arising from a claim by a competitor in connection with the alleged infringement of its trademark. The fair value of this present obligation was determined at N$1,2 million at date of acquisition as the claim was subject to court appeal by B Limited and the related outflow of economic benefits was not considered probable. During August 2021 however, B Limited settled this matter out of court for a total amount of N$700 000. None of the transactions relating to this event has been recorded by B limited.
Show the relevant consolidation journal entries for A limited for the year ended 31 December 2021 in respect of the above transactions. Marks allocations are shown under each section and workings are required where necessary.
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