2 Task Details Karen Ltd acquired all of the shares of Jumbo Ltd, on a cum-div. basis, for $7,200,000 on 1 July 2019. At this date, the financial statements of Jumbo Ltd showed the following balances:...

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Task Details
Karen Ltd acquired all of the shares of Jumbo Ltd, on a cum-div. basis, for $7,200,000 on 1 July
2019. At this date, the financial statements of Jumbo Ltd showed the following balances:
Share capital (1,200,000 shares)
General reserve
Retained earnings
Revaluation surplus
Dividend payable
$ 3,600,000
750,000
1,250,000
450,000
150,000

At acquisition date, all the identifiable assets and liabilities of Jumbo Ltd were recorded at
amounts equal to fair value except for the following:

Carrying amount Fair value
Inventory $320,000 $360,000
Land 1,150,000 1,350,000
Plant (cost $1,200, XXXXXXXXXX,000 910,000

The inventory on hand was sold to Oslo Ltd in November 2019. In August 2020, the land was
sold to Leslie Ltd for $1,450,000. The plant was estimated to have a further five-year life with
no residual value. The dividend payable recorded by Jumbo Ltd at acquisition date was
subsequently paid in July 2019. Goodwill was impaired by $75,000 at 30 June 2020. The tax
rate is 30%.

During the period 1 July 2019 to 30 June 2021, the following intragroup transactions have
occurred between Karen Ltd and Jumbo Ltd:

(T1) At 30 June 2020, Jumbo Ltd approved and declared a final dividend of $85,000, and
Karen Ltd declared and approved a final dividend of $62,000. These dividends were paid
on 31 July 2020.
(T2) On 1 July 2019, Jumbo Ltd sold equipment to Karen Ltd for $160,000. The cost of the
equipment to Jumbo Ltd was $150,000, and the equipment had been depreciated by
$30,000 at the time of sale. Equipment has a further five-year life, with zero residual
value, and is depreciated on a straight-line basis.
(T3) From February 2020 to June 2020, Karen Ltd provided administrative services to Jumbo
Ltd for $150,000. Jumbo Ltd paid $135,000 of this balance in May 2020, and the
remaining $15,000 was paid in August 2020.
(T4) In May 2021, Karen Ltd sold inventory to Jumbo Ltd at a transfer price of $60,000. The
transfer price included a mark-up of 25% on cost. At 30 June 2021, one-quarter of the
goods remained on hand.
3

(T5) In May 2020, Karen Ltd sold inventory to Jumbo Ltd for $140,000. Karen Ltd had
previously purchased the inventory for $110,000. By 30 June 2020, Jumbo Ltd had sold
two-thirds of this inventory to Radley Ltd for $45,000. Jumbo Ltd then sold the
remainder of the inventory to Tonne Ltd in July 2020 for $80,000.
(T6) On 1 July 2019, Jumbo Ltd rented a warehouse to be used jointly by Karen Ltd and Blue
Lake Ltd with each company paying half the agreed rent to Jumbo Ltd. The total rent
paid to Jumbo Ltd was $130,000 for the year ended 30 June 2020.
Required
Part A
(i) Prepare the acquisition analysis and consolidation worksheet entries at 1 July
XXXXXXXXXXmarks)
(ii) Referring to your journal entries for Part A (i), explain the BCVR adjustment(s)
required for land, noting the adjustment to each account separately. (6 marks)
Part B
(i) Prepare the consolidation worksheet entries at 30 June XXXXXXXXXXmarks)
(ii) Referring to your journal entries for Part B (i), explain the BCVR adjustment(s)
required for inventory, noting the adjustment to each account separately. (7
marks)
Part C
(i) Prepare the consolidation worksheet entries at 30 June XXXXXXXXXXmarks)
(ii) Referring to your journal entries for Part C (i), explain the adjustment(s) required
for T2 (equipment), noting the adjustment to each account separately. (16
marks)
Assignments should be typed with all narrations and workings provided. All intragroup
adjustments correctly labelled as T1 – T6. (5 marks)
XXXXXXXXXX = 100 Marks)
Answered 7 days AfterMay 08, 2021Monash University

Solution

Harshit answered on May 10 2021
25 Votes
ANSWER TO PART A
Statement showing Net Asset on 1st July 2018
Particulars
Amount
Share Capital
36,00,000
General Reserve
7,50,000
Retained...
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