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

 

  1. Calculate the acquisition analysis (5 marks)

 

  1. 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

 

 

 

500

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

  1. 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)
  2. Prepare a statement of financial position for Black Hole Ltd as at 30 June 2018 to comply with AASB 101. (8 marks)
  3. 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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