consolidation corporate accounting numerical

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VICTORIA UNIVERSITY COLLEGE OF BUSINESS

BAO5525 FINANCIAL AND CORPORATE ACCOUNTING SEMESTER 2, 2017

CONSOLIDATION ASSIGNMENT Submission Instructions: The assignment is to be submitted electronically via VU Collaborate Assignment Dropbox on:

Sunday, 15 October, 2017 at 11.59 pm 10 marks If you are unable to submit the assignment on time, due to circumstances outside your control, you may apply for a short extension of time of less than five (5) working days. The standard penalty for late submission without an approved short extension will be 5% of the total possible mark per working day. If submission is overdue by more than ten (10) working days the work will not be assessed. Please refer the subject guide for more details. Please scan and submit the Assignment Cover Sheet along with the assignment. Save the assignment file with your name. Also provide the username (NOT PASSWORD) used to log into the computer that was used to do the assignment. This is important to check for plagiarism. Students should keep a copy of their assignment until their result for the unit is finalised.

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CONSOLIDATION ASSIGNMENT

On 1 July 2012, Strong Ltd acquired all the share capital of Weak Ltd for $700 000. At that date, Weak Ltd’s equity consisted of the following: Share capital $ 500 000 General reserve 100 000 Retained earnings 50 000 At 1 July 2012, all the identifiable assets and liabilities of Weak Ltd were recorded at fair value. Financial information for Strong Ltd and Weak Ltd for the year ended 30 June 2017 is presented in the left-hand columns of the worksheet .It is assumed that both companies use the perpetual inventory system. Additional information

(a) During the 2016-17 year, Weak Ltd paid a dividend of $30 000 from profits earned before 20 June 2012.

(b) On January 1 2017, Weak Ltd sold merchandise costing $40 000 to Strong Ltd for $50 000. Half this merchandise was sold to external entities for $30 000 before 30 June 2017.

(c) It is estimated that goodwill acquired in Weak Ltd has been impaired by an amount of $7 000

(d) Strong Ltd sells plant to Weak Ltd for $8 500. This plant had an initially cost Strong Ltd $15 000, is 5 years old and has accumulated depreciation of $8000 at the date of sale. The remaining useful life is assessed as 7 years.

(e) At July 1 2016, there was a profit in the inventory of Strong Ltd of $4000 on goods acquired from Weak Ltd in the previous period.

(f) The tax rate is 30%. Using Microsoft Excel you are required to,

a. Prepare the acquisition analysis on 1 July 2012; b. Prepare consolidation journal entries for the period ended at 30 June 2017; c. Prepare the consolidation worksheet for the period ended 30 June 2017; d. Prepare the Consolidated Financial Statements for the year ended 30 June 2017.

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Financial statements StrongLtd Weak Ltd Adjustments Consolidation Dr Cr

Sales revenue 2 000 000 928 000 Cost of sales

Wages and salaries

Depreciation Other expenses

(700 000)

(61 000) (5 100) (5 500)

(670 000)

(32 000) (4 800)

-

Total expenses (771 600) (706 800) 1 228 400 221 200

Profit from sale of plant Other income

800 30 000

-

Legal fees (3 500) - Profit before income tax

Income tax expense 1 255 700 (367 710)

221 200 (88 480)

Profit for the year Retained earnings

(1/7/16)

887 990 70 820

132 720 70 280

Dividend paid

958 810 (123 710)

203 000 (30 000)

Retained earnings (30/6/17)

Share capital General reserve

835 100 600 000 120 000

173 000 500 000 100 000

1 555 100 773 000 Other components of

equity (1/7/16) Avail-for-sale fin assets

10 000

1 000

10 000 3 000

Other components of equity (30/6/17)

11 000

13 000

Total equity Deferred tax liability

1 566 100 60 000

786 000 30 000

Total equity and liabilities

1 626 100 816 000

Shares in Weak Ltd Cash

Inventory Other current assets

Avail-for-sale fin assets Land

Plant and equipment Accum Depcn & Impair

losses Goodwill

Goodwill- Accum Impair Loss

Deferred Tax Asset

700 000 200 000 370 000 15 100 41 000

230 000 100 000

(30 000)

-

-

- 277 000 36 000

300 000 68 000

120 000 28 000

(13 000)

-

-

1 626 100 816 000