Trimester 1, 2017 Assignment ACC705 Accounting Corporate and Reporting
Question 1
Consolidation worksheet entries
On 1 July 2015, Zack Ltd acquired all the issued shares (ex div.) of William Ltd for $227 500. At this date the equity of William Ltd consisted of:
Share capital $ 150 000
General reserve 34 000
Retained earnings 20 000
At acquisition date, William Ltd reported a dividend payable of $8000. All the identifiable assets and liabilities of William Ltd were recorded at amounts equal to their fair values except for:
Carrying amount Fair value
Plant (cost $200 000) $175 000 $190 000
Land 150 000 155 000
Inventory 32 000 40 000
The plant was considered to have a further 3-year life. Of the inventory, 90% was sold by 30 June 2016 and the remainder was sold by 30 June 2017. The land was sold in January 2016 for $170 000. William Ltd had recorded goodwill of $2000 (net of accumulated impairment losses of $12 000). William Ltd was involved in a court case that could potentially result in the company paying damages to customers. Zack Ltd calculated the fair value of this liability to be $8000, even though William Ltd had not recorded any liability.
The following events occurred in the year ending 30 June 2016.
- On 12 August 2015 William Ltd paid the dividend that existed at 1 July 2015.
- On 1 December 2015 William Ltd transferred $17 000 from the general reserve existing at 1 July 2015 to retained earnings.
- On 1 January 2016 William Ltd made a call of 10c per share on its issued shares. William Ltd had 100 000 shares on issue. All call money was received by 31 January 2016.
- On 29 June 2016 William Ltd reassessed the liability in relation to the court case as the chances of winning the case had improved. The fair value was now considered to be $2000.
Required
- Calculate the acquisition analysis (5 marks)
- Prepare the consolidation worksheet entries for the preparation by Zack Ltd of its consolidated financial statements at 30 June 2016. (10 marks)
Question 2
Statement of profit or loss and other comprehensive income (classify expenses by function), statement of financial position and statement of changes in equity
The trial balance of Black Hole Ltd at 30 June 2018 was as follows:
| Debit | Credit | |||||
| Share capital (ordinary shares issued at $2, fully |
$ 500 58 000 87 700 7 000 |
$ 200 000
25 000 128 400 85 000 250 000 69 200 80 000 2 800 69 500 10 000 52 100 34 200 18 400 12 800 42 500 10 000
|
||||
| paid)
General reserve Retained earnings (1/7/17) Revaluation surplus Mortgage loan Bank overdraft (at call) 7% debentures Interest payable Accounts payable Dividend payable Current tax liability Provision for employee benefits Deferred tax liability Allowance for doubtful debts Accumulated depreciation – plant equipment Accumulated impairment – goodwill Cash Accounts receivable Inventory Prepaid insurance |
and | |||||
| Plant and equipment
Land Buildings Goodwill Deferred tax asset Sales revenue Cost of sales Administrative expenses Other expenses Interest revenue Dividends revenue Income tax expense Dividends paid Dividends declared |
222 500
220 000 380 000 105 000 9 800
450 000 265 000 10 000
50 400 20 000 10 000 |
825 000
2 500 3 500
|
||||
Transfer to general reserve 25 000 $1 920 900 $1 920 900
Additional information
- Administrative expenses for the year include interest expense of $28 700.
- All assets are carried at cost, except for land and buildings which are carried at valuation.
- During the year, 50 000 shares were issued at an issue price of $2 each, payable in full on application.
- On 30 June 2018, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.
- The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.
- The 7% debentures are to be redeemed on 31 March 2019. There is no plan to refinance these debentures in the future.
- The provision for employee benefits consists of:
Annual leave $18 000
Long-service leave 16 200
- No employee is eligible for long-service leave until 2022.
- The company tax rate is 30%.
Required
- Prepare a statement of profit or loss and other comprehensive income for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101 (classify expenses by function). (4 marks)
- Prepare a statement of financial position for Black Hole Ltd as at 30 June 2018 to comply with AASB 101. (8 marks)
- Prepare a statement of changes in equity for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101. (3 marks)
[Comparative information must be disclosed in respect of the preceding period for all amounts reported in the current period’s financial statements in accordance with AASB 101 paragraph 38. However this information is not provided in the question].
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