Financial statements assignment help

Financial Statements Assignment Help Question 3 (30 Marks) On 1 July 2013, Samwell Ltd acquired 100% of the share capital of Gilly Ltd (cum div) for $810,000. Gilly Ltd’s balance sheet on acquisition date included: Dividend payable

$10,000

Retained earnings

200,000

Share capital

500,000

General reserve

50,000

At acquisition date, all of Gilly Ltd’s net assets were recorded at fair value except for: Carrying amount

Fair

Inventory

$34,000

$40

Land

67,000

75

Contingent liability

–

10

Buildings (Cost $96,000)

67,200

78

Additional Information: 2013. a) The dividend payable at acquisition date was subsequently paid in August 2013.

2014. b) The revalued inventory was sold during the year ended 30 June 2014.c) The contingent liability identified on the acquisition of Gilly Ltd still existed at 30 June 2017. d) The revalued land was sold during the year ended 30 June 2017 for $42,000.

2015. e) The revalued buildings were still held at 30 June 2017 being depreciated on the straight line basis at 10% p.a.

2016. f) Since acquisition, goodwill has been impaired by $4,000. $1,500 of this impairment occurred during the year ended 30 June 2017.

2017. g) Of the management fee revenues earned by Samwell Ltd during the year ended 30 June 2017, $12,000 was collected from Gilly Ltd. 2018. h) Gilly Ltd’s inventory balance at 1 July 2016 included an item previously purchased from Samwell Ltd. This inventory had been sold by Samwell Ltd to Gilly Ltd at a profit of $4,000.

2019. i) During the year ended 30 June 2017, Gilly Ltd sold a quantity of inventory to Samwell Ltd for $18,000. This inventory had originally cost Gilly Ltd $12,000 with 25% of this inventory still being held by Samwell Ltd at 30 June 2017.

2020. j) All dividends paid/declared by Samwell Ltd during the year ended 30 June 2017 was from post-acquisition profits.

1. k) Financial statements for the year ended 30 June 2017 are reproduced below: Samwell Ltd

Gi

Sales

$5,220,000

$2,

Cost of goods sold

(4,070,000)

(2,2

Gross profit

1,150,000

Dividend revenue

92,000

Interest revenue

–

Management fees revenue

25,000

Other income

30,000

Depreciation expense

(180,000)

(8

Finance costs

(91,000)

(3

Other expenses

(284,000)

(3

Profit before income tax

742,000

32

Income tax expense

(202,000)

(8

Profit after tax

540,000

23

Retained earnings at (01/07/16)

695,000

32

Interim dividend paid

(70,000)

(3

Final dividend declared

(140,000)

(6

Retained earnings at (30/06/17)

1,025,000

46

Share capital

800,000

50

General reserve

210,000

5

Total equity

2,035,000

Trade and other payables

413,000

13

Dividend payable

140,000

6

Loan from Gilly Ltd

250,000

46

2

1,0

(8% per year, interest payable 31 December)

Mortgage loan

1,453,000

40

Deferred tax liabilities

90,000

Total liabilities

2,346,000

59

Total liabilities and equity

4,381,000

1,6

Cash

194,000

11

Trade and other receivables

72,000

3

Dividends receivable

60,000

Inventory

750,000

44

Land

770,000

25

Buildings

1,500,000

78

Accumulated depreciation buildings

(320,000)

(49

Plant and equipment

790,000

45

Accumulated depreciation plant and equipment

(235,000)

(21

Investment in Gilly Ltd

800,000

Loan to Samwell Ltd (8% per year, interest payable 31 December) – Total Assets

4,381,000

Required: 1.

Determine the gain on bargain purchase or goodwill as at acquisition date. (2 marks) 2. Prepare the consolidation journal entries for Samwell Ltd immediately after acquisition on 1 July 2013. (6 marks) 3. Prepare the consolidation journal entries for Samwell Ltd as at 30 June 2017. (14 marks) 4.Prepare the consolidation worksheet for the preparation of the consolidated financial statements by Samwell Ltd as at 30 June 2017. (8 marks)

25

1,6

(Source: adapted from Arthur, N., Luff, L., Keet, P. Accounting for corporate combinations and associations (7e), Pearson Education, Australia.)

Question 4 (40 marks) Part A (30 marks) On 1 January 2013, Petyr Ltd acquired 80% of the share capital of Sansa Ltd for $4,400,000. At acquisition date, Sansa Ltd’s balance sheet included: Share capital

$5,000,000

Retained profits

350,000

General reserve

50,000

At acquisition date, all of Sansa Ltd’s net assets were recorded at fair value except for: Carrying Amount Equipment (cost $67,000) 1.

2.

3.

4.

5.

6.

$50,000

Fair

$58

Additional information: a) Petyr Ltd adopts the partial goodwill method. b) The revalued equipment was still held at 30 June 2017, being depreciated on the straight-line basis over 5 years. c) On 1 January 2016, Sansa Ltd sold an item of equipment to Petyr Ltd, recognising a gain of $22,000 on the sale. This equipment was still held at 30 June 2017 and at the time of the sale it was estimated that it would have a further useful life of 10 years. d) During the year ended 30 June 2017, Sansa Ltd sold a quantity of inventory to Petyr Ltd for $28,000. Sansa Ltd received a gain of $8,500 on the sale and Petyr Ltd still held 25% of this inventory at 30 June 2017. e) During the year ended 30 June 2017, Petyr Ltd sold an item of plant to Sansa Ltd at a gain of $80,000. This machinery was held as inventory in the books of Sansa Ltd at 30 June 2017. f) Financial statements for the year ended 30 June 2017 are reproduced below: Petyr Ltd

Sans

Sales

$3,283,750

$1,80

Cost of goods sold

(1,490,000)

(1,46

Gross profit

1,793,750

Gain on sale of plant

80,000

Other income

16,250

340

Depreciation expense

(320,000)

(240

Other expenses

(180,000)

(130

Profit (loss) before income tax

1,390,000

(30,

Income tax expense/income

(440,000)

10,

Profit (loss) after tax

950,000

(20,

Retained earnings at 01/07/16

1,100,000

600

Dividends paid

(500,000)

Dividend declared

–

(25,

Trans. from general reserve

–

15,

Retained earnings at 30/06/17

1,550,000

570

Share capital

7,000,000

5,00

General reserve

–

Total Equity

8,550,000

Current tax liability

480,000

Other liabilities

960,000

Borrowings

–

Deferred tax liability

–

Total Liabilities

1,440,000

2,35

Total liabilities and equity

9,990,000

7,96

Inventory

420,000

543

Other current assets

930,000

2,18

Property, plant and equipment

4,210,000

1,99

Accumulated depreciation

(1,050,000)

(800

35,

5,60

855

1,50

Investments

5,400,000

Deferred tax asset

80,000

Total assets

9,990,000

3,58

460

7,96

Required: 1.

Determine the gain on bargain purchase or goodwill as at acquisition date. (2 marks) 2. Prepare the consolidation journal entries for Petyr Ltd at 1 January 2013, immediately after acquisition. (4 marks) 3. Prepare the consolidation journal entries for Petyr Ltd as at 30 June 2017. (16 marks) 4.Prepare the consolidation worksheet for the preparation of the consolidated financial statements by Petyr Ltd as at 30 June 2017. (8 marks) (Source: adapted from Arthur, N., Luff, L., Keet, P. Accounting for corporate combinations and associations (7e), Pearson Education, Australia.)

Part B (10 marks) On 1 July 2017, Tywin Ltd acquired 75% of the shares (cum div.) of Shae Ltd for $120,500. At this date the equity of Shae Ltd consisted of: Share capital

$ 40,00

General reserve

3,000

Retained earnings

25,000

At the date of the business combination, all the identifiable assets and liabilities of Shae Ltd had carrying amounts equal to their fair values except for: Carrying amount

Fair

Plant (cost $60,000)

$40,000

$5

Inventory

25,000

31

Receivables

33,000

30

Additional information: 1. a) One of the liabilities of Shae Ltd at 1 July 2017 was a dividend payable of $5,000.

2. b) The tax rate is 30% Required: 1.

Prepare the acquisition analysis as at acquisition date using the partial goodwill method. Show all workings. (2 marks) 2.

Prepare the acquisition analysis as at acquisition date using the full goodwill method and the fair value of the non-controlling interest at the date of acquisition is $20,000.

Show all workings. (3 marks