The question will relate to consolidation and disclosure. Required to complete a set of financial report and prepare consolidation journal entries and calculate the acquisition analysis. The company accounts will be provided in the question.
Short report – Financial statements and consolidation entries should be attached to the report and highlighted in the report. This report should be in a format as would bge prepared for a client of a contemporary accountant’s office.
Section A
Consolidation of wholly owned subsidiary, pre-acquisition equity and BCVR entries for assets and liabilities
A Ltd acquired all the issued shares of B Ltd on 1 January 2016 for $88 000. At this date the equity of B Ltd consisted of:
Share capital $40,000
General reserve $10,000
Retained earnings $8,000
All the identifiable assets and liabilities of B Ltd were recorded at amounts equal to their fair values except for:
Carrying amount Fair value
Fixtures & Fittings(cost $70,000) $50,000 $55,000
Inventory $10,000 $15,000
Of the inventory on hand at 1 January 2016, 90% was sold by 30 June 2016. The remainder was all sold by 30 June 2017. The Fixtures & Fittings was considered to have a further 2-year life with benefits to be received equally in each of those years. There were no records in the books for a provision of legal claim worth 5,000 and patents of 60,000. These were reflected at fair value. The tax rate is 30%.
Required
Prepare the consolidated worksheet entries for the consolidated financial statements prepared by A Ltd at 30 June 2016.
Show acquisition analysis calculation, BCVR entries and Pre-acquisition entries for 30.6.16
Question 2 (10 marks)
The following information has been extracted from the accounting records of C Ltd for the year ended 30 June 2016:
Debit Credit
Sales $11,000,000
Dividends paid 6,000
Cost of sales 7,060,000
Finance costs 88,000
Distribution cost 204,000
Transfer from general reserve 11,000
Marketing costs 55,000
Administrative costs 99,000
Proceeds from sale of plant and machinery 60,000
Carrying amount of plant and machinery 40,000
Tax rate is 30%.
Required
Prepare a statement of profit or loss and other comprehensive income for C Ltd, for the year ended 30 June 2016, and notes to the accounts in compliance with AASB 101. Please classify expenses by function.