Advanced Financial Accounting

110.309 Advanced Financial Accounting

Assignment 2: New Zealand Limited (NZL)

Hyun Ki  Lee

Unit 213, St Claire Village, 172 McLeod Road, Te Atatu South, Auckland  0610

Student ID:  15160284

Dear Hyun Ki

This email provides you with the information and instructions for Assignment 2. This assignment comprises two parts, Part A on consolidation

Part A

You are on an internship with the Accounting Team at New Zealand Limited (NZL). As you have studied consolidations in your advanced financial accounting paper at Massey University, the Accounting Team has requested your assistance in preparing the consolidated financial statements of NZL and its subsidiaries for the year ended 31 March 2016.

New Zealand Limited (NZL) is a major trading company. It embarked on an ambitious expansion programme in 2015 including the acquisition of two other companies, North Island Limited (NIL) and South Island Limited (SIL). All three companies have financial years 1 April to 31 March

NZL partly acquiring NIL

New Zealand Limited (NZL) acquired a 55 per cent interest in North Island Limited (NIL) on 1 April 2015 for $2 million.  All assets and liabilities are fairly valued in the books of NIL limited.  The equity section on the balance sheet of NIL at the date of acquisition appears below:

	$
Share Capital	2,000,000
Retained Earnings	600,000
	2,600,000

NZL partly acquiring SIL

NZL Limited acquires a 55 per cent interest in South Island Limited (SIL) on 1 April 2015 for $1.6 million. All assets and liabilities are fairly valued in the books of SIL limited. The equity section on the balance sheet of SIL on 31 March 2015:

	$
Share Capital	1,600,000
Retained Earnings	800,000
	2,400,000

End of year financials

The trial balances of the three entities as at 31 March 2016 can be downloaded in a spreadsheet by clicking here .

Additional information:

Plant and equipment

1. On 1 April 2015, NZL Ltd sold plant to NIL for $15,000.  The plant cost NZL $10,000 on 1 April $2013.  Both companies apply a 10% p.a. straight-line method of depreciation in relation to these assets.

Inventory

2. During the current year, NZL sold inventory to NIL Ltd for $18,000 recording a profit of $3000.  NIL has not resold any of these items.

3. During the current financial year, SIL Ltd sold inventory to NZL Ltd for $23,000 recording a profit of $4000.  NZL has since resold half of these items.

4. During the current year NIL sold inventory to SIL Ltd for $15,000 recording a profit of $2000.  SIL has resold all of these items.

Services

5. During the current financial year, NIL paid $2000 to NZL Ltd for services rendered.

Goodwill

6. Goodwill from investment in SIL has not been impaired while the goodwill from the investment in NIL had an impairment loss of 20 per cent during the current financial year.

Non-controlling interests

7. The group has adopted the policy of measuring non-controlling interest at the fair value of total acquisition and recognising full goodwill.

Tax Implications

8. You may ignore tax implications for the purposes of this assignment.

Instructions:

Prepare the consolidated financial statements for NZL and its controlled entities as at 31 March 2016. You have been provided with an Excel template for entering the $ amounts for the items in the consolidated financial statements. To download this Excel template click here .

Submission

Complete the Excel template and submit after renaming it as follows:

B15160284_110309Ass2_Hyun Ki_Lee.xlsx

Submission

Please submit the completed template (Word file) after renaming it as follows:

B15160284_110309Ass2_Hyun Ki_Lee.xlsx

The digital files for Assignment 2

You can access all the digital files for this assignment by clicking here .

110.309 Advanced Financial Accounting

Assignment 2, Part A, New Zealand Limited (NZL)

Hyun Ki  Lee

Student ID:  15160284

Dear Hyun Ki

This email provides you with additional information you have requested from the Leader of the Accounting Team at NZL Group while conducting your preparation for the consolidation.

While doing the preliminary analysis of the information of NZL Group you thought it would be useful to have the acquisitions date fair values of the non-controlling interests in both North Island Limited (NIL) and South Island Limited (SIL). You sent an email to the Leader of the Accounting Team at NZL Group requesting this information.

The Leader of the Accounting Team responded to your email as follows:

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Hi Hyun Ki

Thanks you for your assistance with preparing the consolidated financial statements of NZL Group. Much appreciated!

Here is the information you requested: 

The fair value of non-controlling interests in North Island Limited (NIL) on 1 April 2015 is $1636364

The fair value of non-controlling interests in South Island Limited (SIL) on 1 April 2015 is $1309091

Regards,

TL

Team Leader

Accounting, NZL Group

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