Topic: Consolidation worksheet, consolidated financial statements
Task Details: Griffin Ltd is a major Australian company operating in the manufacture of women’s clothing. One of its major competitors is Frank Ltd whose business was established by a French family over 30 years ago. It has won numerous awards for its designs and has established a number of brands that have been successful, especially with the teenage market.
In order to expand its business as well as to reduce the number of players in the market, on 1 July 2016 Griffin Ltd acquired all the issued shares (cum div.) of Frank Ltd for $330 000. At this date the equity of
Frank Ltd was as follows:
| Share capital | $200 000 |
| General reserve | 20 000 |
| Retained earnings | 50 000 |
All the identifiable assets and liabilities of Frank Ltd were recorded at amounts equal to their fair values except for the following:
| Carrying amount | Fair value | |
| Plant (cost $220 000) | $180 000 | $186 000 |
| Land | 190 000 | 210 000 |
| Inventories | 20 000 | 28 000 |
The plant’s expected remaining useful life was 5 years with benefits being expected evenly over that period. The plant was sold on 1 January 2019 for $187 000. The land was sold in February 2018 for $250 000. Of the inventory, 90% was sold by 30 June 2017 and the rest by 30 June 2018.
At 1 July 2016, Frank Ltd had recorded a dividend payable of $10 000 that was paid in September 2016. Frank Ltd also had some unrecorded assets, in particular the brands relating to the successful clothing sold in the teenage market. Griffin Ltd valued these brands at $12 000 and assessed them to have an indefinite life. In its financial statements at 30 June 2016, Frank Ltd raised a contingent liability relating to a guarantee it had made to one of its related companies. Griffin Ltd assessed the fair value of the guarantee payable at $10 000. In August 2018, Frank Ltd was required to pay $2500 in relation to the guarantee.
All transfers to the general reserve made by Frank Ltd have been from retained earnings earned prior to 1 July 2016. The tax rate is 30%.
The financial information provided by the two companies at 30 June 2019 is as follows:
| Griffin Ltd | Frank Ltd | |
| Revenues | $ 190 000 | $ 110 000 |
| Expenses | 80 000 | 76 000 |
| 110 000 | 34 000 | |
| Gains on sale of non-current assets | 5 000 | 4 000 |
| Profit before tax | 115 000 | 38 000 |
| Income tax expense | (40 000) | (6 000) |
| Profit for the year | 75 000 | 32 000 |
| Other comprehensive Income: | ||
| Gains on revaluation of plant | 12 000 | 0 |
| Comprehensive income for the year | $ 87 000 | $ 32 000 |
| Profit for the year | $ 75 000 | $ 32 000 |
| Retained earnings (1 July 2018) | 80 000 | 88 000 |
| 155 000 | 120 000 | |
| Dividend paid | (34 000) | 0 |
| Transfer to general reserve | 0 | (15 000) |
| (34 000) | (15 000) | |
| Retained earnings (30 Juno 2010) | $ 121 000 | $ 105 000 |
| Share capital | $ 280 000 | $ 200 000 |
| General reserve | 20 000 | 48 000 |
| Asset revaluation surplus | 24 000 | 0 |
| Retained earnings | 121 000 | 105 000 |
| Total equity | 445 000 | 353 000 |
| Provisions | $ 15 000 | $ 12 000 |
| Payables | 40 000 | 8 000 |
| Total liabilities | 55 000 | 20 000 |
| Total equity and liabilities | $ 500 000 | $ 373 000 |
| Cash | $ 12 000 | $ 30 000 |
| Accounts receivable | 28 000 | 12 000 |
| Inventories | 30 000 | 51 000 |
| Plant | 230 000 | 320 000 |
| Accumulated depreciation — Plant | (120 000) | (40 000) |
| Shares In Frank Ltd | 320 000 | 0 |
| Total assets | $ 500 000 | $ 373 000 |
Required: Prepare the consolidated financial statements of Griffin Ltd at 30 June 2019.
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