Corporate Accounting Systems

200109 Corporate Accounting Systems

Consolidated Financial Statements with Non-Controlling Interests

Spring 2014

INSTRUCTIONS

1.       The assignment is to be submitted as an individual attempt. It must be prepared using Excel spreadsheet and be entirely your own work from this semester only – i.e. do not use or copy any file, in whole or in part, from any previous semester or from any other person. Each student must individually create a new excel file for this assignment and use their student number as the file name.

2.       The assignment cover sheet and marking guide can be found as the last two pages of this document. Print these pages and complete the appropriate details. Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well have met the expected standards (performance levels) for the criteria identified.

3.       Your submission needs to be printed on A4 paper, single-sided, and the pages must be stapled at the top left hand corner only. Do not bind your assignment, nor put it in a folder or a plastic sleeve. The first page must be the completed and signed cover sheet and the last page should be the marking sheet with your student ID and name shown. The marker will use the marking sheet to calculate your assignment result and provide you with feedback on the standard you achieved against each of the criteria. Assignments which do not have these two completed sheets attached will not be accepted.

4.       The printed assignment is to be submitted to your tutor during the first 10 minutes of your usual tutorial class in Week 10 beginning 29^th September 2014. Submissions made during the tutorial, but after the 10 minute deadline, will be penalised by the deduction of 1 mark. Assignments not submitted at the registered tutorial class will be regarded as “late”. Students will need to contact the unit coordinator about the process for late submission, if necessary. All late submissions will be penalised as per UWS policy – a deduction of 2 marks (being, 10% of the possible mark) for each day, or part day, late. Submissions will not be accepted by email. If you cannot attend at your normal tutorial time you need to either send it along with a fellow classmate or personally hand it to your tutor before the class in which it is due - you would need to make arrangements directly with them about organising this.

5.       After handing in the printed copy, the excel file must also be uploaded to vUWS by 5pm on Friday 3^rd October 2014 at the latest. Further instructions on this process will be provided on vUWS closer to the due date. The excel file MUST EXACTLY MATCH the printed version and not be modified after the submitted version was printed. Uploading a file that doesn’t match exactly, or failing to upload the excel file on time, will result in a significant penalty! The file will be checked against other students’ submissions for potential plagiarism.

6.       Marks will be lost for poor quality presentation, for incorrect work, and for missing work. The presentation of the financial statements must follow the format of the examples and end-of-chapter exercise in chapter 29 of the textbook.

7.       Staff will not assist students with their answers, nor review draft answers to confirm if students are “on the right track” or not. Any queries about the requirements of the assignment must be directed to the Unit Coordinator only, not to other teaching staff.

General Hint: 

This is not an assignment that you should commence a day or two before it is due!!!  There is a lot of work to do in the time that you have available to complete the assignment. The assignment question can be complex in places, but these complexities can be resolved by thoroughly reading the relevant material that has been covered. You will also need to call on your prior understanding of accounting and logically consider some of the entries needed as they may not all be shown explicitly in the textbook.

QUESTION

Using the information below and on the next two pages, prepare the following as at 30th June 2014:

PART A:      Consolidation adjustment/elimination journal entries that are required at the above financial year end date (i.e. for one year only); and

PART B:      A detailed calculation of non-controlling interest balance and consolidation worksheet; and

PART C:      Consolidated financial statements and statements of changes in equity for both the the group and parent.

THE FOLLOWING EVENTS OCCURRED:

During the year ended 30 June 2012:

1.       On 17 October 2011 Sydney Ltd created a group entity when it purchased 90% of the issued capital of Tower Ltd for $289,980 cash. On acquisition, Tower Ltd’s accounts showed: Share capital $200,000 and Retained earnings $58,000. All assets and liabilities appearing in Tower Ltd’s financial statements were fairly valued, except:

·         One of their blocks of land was recorded at $100,000 when its fair value was judged by the group to be $130,000. During the following financial year this land was sold for $140,000 cash.

·         An item of plant was undervalued by $50,000. At that time it had a remaining life of 5 years and accumulated depreciation of $36,000. The plant is still an asset of Tower Ltd at 30 June 2014.

·         A contingent liability relating to an unsettled legal claim with a fair value of $50,000 was recorded in the notes to the financial statements. This amount will be tax deductible when paid. The court case is still in progress at 30 June 2014.

During the year ended 30 June 2013:

2.       On 1 July 2012 Tower Ltd sold an item of plant to Sydney Ltd for $59,000. This was financed by a short-term interest-free loan from Tower Ltd that was repaid 14 months later. The plant had cost $64,000 when purchased on 13 November 2011. It’s expected useful life was originally 5 years and this original estimate is still considered to be valid. The plant is still an asset of Sydney Ltd at 30 June 2014.

3.       During the year Sydney Ltd made sales of inventory to Tower Ltd of $569,600. The inventory balance of Tower Ltd at the end of the year included stock of $84,000 acquired from Sydney Ltd. Sydney Ltd declared and paid dividends of $90,000 for the year. Tower Ltd did not declare or pay any dividends for the year.

During the year ended 30 June 2014:

4.       On 23 December 2013 Sydney Ltd sold an item of plant to Tower Ltd for $100,000 when its carrying value in Sydney’s books on that date was $170,000 (original cost $212,500 and original estimated life of 10 years). The plant is still an asset of Tower Ltd at 30 June 2014.

5.       During the year Tower Ltd made sales of inventory to Sydney Ltd of $88,200. The inventory balance of Sydney Ltd at the end of the year included stock of $54,300 acquired from Tower Ltd.

6.       The management of Sydney Ltd believes that the goodwill acquired on acquisition of Tower Ltd was impaired by $5,000 in the current year. This is in addition to a total of $8,000 of impairment in previous years.

7.       Sydney Ltd charged management fees to Tower Ltd.

8.       Dividends were declared/paid by both companies.

9.       Non-controlling interests in Tower Ltd to be recognised. This is the only subsidiary in the group.

ADDITIONAL INFORMATION:

·         The company tax rate is currently 30% and it has been this rate for many years.

·         Sydney Ltd has the following accounting policies for the group:

(i)     Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary;

(ii)    Non-controlling interests are measured at fair value;

(iii)   Intragroup sales of inventory to be at a selling price of cost plus a mark-up of 50%;

(iv)   Plant is depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of days the asset is held in the relevant year, with the day of acquisition counting as one day while the day of disposal does not count; and

(v)    All calculated amounts are to be rounded to the nearest whole dollar.                Companies in the group do not show cents in any journals, worksheets, or financial statements.

NOTE:

·         You MUST number your journal entries and present them in the order as they relate to the number given for each “event”. Where more than one journal is needed for an “event” to be completely accounted for add the letters a,b,c,…etc to them as necessary. [For example, if three separate journal entries are required to fully record the information detailed in point number 1, then the first journal will be 1a and the second is to be 1b and the third 1c.] Short narrations are expected for each journal entry. Marks will be lost if journals are not presented in a clear and professional manner (i.e. poor or unclear presentation can include showing the debit entry on one page but the credit entry on another, or not clearly distinguishing between debit and credit entries).  

·         The required statements for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Follow the formats shown in Chapter 29 of the textbook. Notes to the statements are not required. Marks will be lost if statements are not presented in a clear and professional manner (i.e. poor or unclear presentation can include splitting the reports over two pages, so start each statement on a new page!).

·         You may “cut and paste” the financial information on the next page into your excel file, but no other information is to be copied into your file from anywhere else.

·         You are expected to use at least the basic formula functions in Excel when preparing worksheets and financial statements (i.e. use Excel formulas to add totals and sub-totals etc, rather than calculating values manually and then just typing  them in to the spreadsheet!).

·         This is the final unit in the accounting major where you will have to produce complex journal entries and financial reports at a professional level. Therefore, a very high standard is expected. Approach it as if you are preparing it for your employer. The reports cannot be late for the board meeting and the directors carefully review all of the information you give them. They pay you well, but they expect quality work. It needs to be technically correct and presented well, otherwise you will need to look for another job!!!

Assignment Cover Sheet

School of Business

Declaration:

·         I prepared this assignment using Excel and I hold a copy of the file if the printed original is lost or damaged or if I am required to submit the file for plagiarism checking.

·         I hereby certify that no part of this assignment has been copied from any other student’s work or from any other source except where due acknowledgement is made in the assignment.

·         No part of the assignment has been written or produced for me by any other person.

·         I am aware that this work may be compared to work submitted by other students studying this unit this semester for the purpose of detecting possible plagiarism/collusion.

·         I am aware that this work may be reproduced and submitted to plagiarism detection programs for the purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism checking).

Signature:______________________________________

Note:  An examiner or lecturer/tutor has the right to not mark this assignment if the above declaration has not been signed.