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1
ACC00145 Assignment 2
Due date: 5pm Friday 12 September 2014
Weighting: 20% (The total marks of this assessment task will be converted to a score out of
20 towards your overall grade)
Objective: Apply selected accounting standards to practical problems from topic 8
Submit your assignment to the link provided in the “Assessment Details” on the BB site.
The link to submit an assignment will be open 4–5 weeks before the due date. After the due
date, a separate link will be available for late submission with approved extension. This
assignment will not apply Turnitin assignment. You must use the electronic Assignment
Cover Sheet provided, fill in details and then make the cover sheet the first page of your
assignment. Do not send it as a separate document. The file name of your assignment should
include (in order) your surname and your student number. For example:
‘Parker1235456'. Your assignments must be submitted as .docx or .xlsx documents. If you
wish to submit in any other file format please discuss this with your lecturer before the
assignment submission date.
2
The financial statements of Pacific Ltd and its subsidiary Sea Ltd contained following
information at 30 June 2014. Information extracted from the Statement of Comprehensive Income:
Pacific Ltd Sea Ltd
$ $
Sales 436,000 236,000
Cost of Goods Sold 105,000 73,000
Gross profit 331,000 163,000
Dividend revenue 210,000
Other income 85,000
Depreciation expense 66,000 76,000
Impairment loss - investment in Sea Ltd 75,000
Salaries and administrative expense 82,000 68,000
Income tax expense 35,000 28,000
Profit after tax 368,000 -9,000
Information extracted from the Statement of Financial Position:
Pacific Ltd Sea Ltd
$ $
Assets
Current Assets
cash 71,000 112,000
Inventory 104,000 173,000
Non-Current Assets
Plant and Equipment 660,000 560,000
Less: Accumulated depreciation 132,000 148,000
Investment in Sea Ltd 880,000
Accumulated impairment of investment in Sea Ltd
75,000
Total Assets 1,508,000 697,000
Liabilities
Accounts payables 89,000 37,000
Dividends payable 180,000
Loan 135,000 79,000
Shareholders' equity
Retained earnings at 30 June 2014 394,000 101,000
Share capital 560,000 360,000
General reserve 150,000 120,000
Total liabilities and Shareholders' Equity 1,508,000 697,000
Pacific Ltd acquired all the shares of Sea Ltd on 1 July 2012 for $880,000. The shareholders’
equity of Sea Ltd consisted of share capital $360,000, general reserve $120,000 and retained
earnings $230,000 at the acquisition date.
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Other information:
1) Sea Ltd paid 2012/2013 final dividends of $75,000 on 7 September 2013, dividends
were paid from profits earned before acquisition.
2) Sea Ltd paid interim dividends of $135,000 on 15 February 2014. Dividends were
paid from profits earned since 1 July 2012.
3) Pacific Ltd declared final dividends of $180,000 on 30 June 2014. Final dividends
were unpaid at the reporting date.
4) During 2013/2014 financial year, Sea Ltd sold inventory to Pacific Ltd for $55,000.
The inventory was valued $31,000 in Sea Ltd. Half of the inventory was still on hand
at the end of June 2014.
5) Pacific Ltd sold an item of equipment to Sea Ltd at a price of $200,000 on 1 July
2013. The remaining useful life of this equipment is 5 years. Its original cost was
$210,000 in Pacific Ltd and accumulated depreciation was $35,000.
6) Retained earnings and dividends information were available as below:
7) The income tax rate is 30%. Straight-line depreciation method is used in Pacific Ltd
and Sea Ltd. The reporting date is 30 June.
Required:
a) Is there any goodwill to be recognised as per the requirements of AASB 3 (FP)
Business Combinations (for for-profit entities)? Discuss? (5 marks)
b) Will goodwill be amortised according to AASB 138 [FP] Intangible Assets (for for-
profit entities)? Discuss the measurement of goodwill after the recognition as per the
requirements of AASB 138 [FP] Intangible Assets (for for-profit entities) (5 marks)
c) Discuss and explain the accounting treatment of dividends paid from pre-acquisition
earnings and after-acquisition earnings. (6 marks)
d) Provide the definition of an intragroup transaction and give two examples of
intragroup transactions. Discuss the treatment of intragroup transactions in
consolidation (you can use the examples you identified to explain) (7 marks)
e) Prepare consolidation journal entries for events recoded from 1) to 5) at the end of 30
June 2014. (28 marks)
f) Prepare a consolidated worksheet. (52 marks)
g) Prepare a Consolidated Statement of Financial Position, a Statement of
Comprehensive Income and a Statement of Changes in Equity for the year ended 30
June 2014. (39 marks)
Pacific Ltd Sea Ltd
$ $
Retained earnings at 30 June 2013 206,000 320,000
Less dividends paid and declared 180,000 210,000
Retained earnings at 30 June 2014 394,000 101,000
