On 1 July 2018, Ghostbusters Ltd acquired all the shares of Bat Ltd for $330 000 on an ex-div. basis. On this date, the equity and liabilities of Bat Ltd included the following balances:
Share capital | $ 200 000 |
General reserve | 25 000 |
Retained earnings | 45 000 |
Dividend payable | 10 000 |
Provisions | 169 500 |
At acquisition date, all the identifiable assets and liabilities of Bat Ltd were recorded at amounts equal to fair value except for:
Carrying amount | Fair value | |
Plant and equipment (cost $300 000) | $186 000 | $190 000 |
Trademark | 100 000 | 110 000 |
Inventories | 70 000 | 80 000 |
Land | 50 000 | 70 000 |
Goodwill | 25 000 | 55 000 |
Machinery (cost $18 000) | 15 000 | 16 000 |
Goodwill was not impaired in any period. The plant and equipment had a further 5-year life at acquisition date and was expected to be used evenly over that time. The trademark was considered to have an indefinite life. The machinery, which was estimated to have a further 4-year life at acquisition date, was sold on 1 January 2020. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation.
During the year ended 30 June 2019, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2020. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.
Additional information
- Of the interim dividend paid by Bat Ltd in the current year, $5000 was from profits before acquisition date. All other dividends were from current year profits. Shareholder approval is not required in relation to dividends.
- On 1 July 2019, Bat Ltd has on hand inventory worth $12 000, being transferred from Ghostbusters Ltd in June 2019. The inventory had previously cost Ghostbusters Ltd $8000. On 31 March 2020, Bat Ltd transferred an item of plant with a carrying amount of $10 000 to Ghost Ltd for $15 000. Ghostbusters Ltd treated this item as inventory. The item was still on hand at the end of the year. Bat Ltd applied a 20% depreciation rate to this plant.
- On 1 January 2020, Bat Ltd acquired $8000 inventory from Ghostbusters Ltd. This inventory originally cost Ghostbusters Ltd $5000. The profit in inventory on hand at 30 June 2020 was $1000.
- During the year ending 30 June 2020, Bat Ltd sold inventory costing $12 000 to Ghostbusters Ltd for $18 000. Two-thirds of this was sold to external parties for $9000.
- On 1 January 2019, Ghostbusters Ltd sold furniture to Bat Ltd for $8000. This had originally cost Ghostbusters Ltd $12 000 and had a carrying amount at the time of sale of $7000. Both entities charge depreciation at a rate of 10% p.a.
- Ghostbusters Ltd sold some land to Bat Ltd in December 2019. The land had originally cost Ghostbusters Ltd $25 000, but was sold to Bat Ltd for only $20 000. To help Bat Ltd pay for the land, Ghostbusters Ltd gave Bat Ltd an interest-free loan of $12 000. Bat Ltd has as yet made no repayments on the loan.
- The tax rate is 30%.
On 30 June 2020 the trial balances of Ghostbusters Ltd (Ghost) and Bat Ltd were as follows:
Ghost Ltd | Bat Ltd | |
Debit balances | ||
Shares in Bat Ltd | $325 000 | — |
Cash | 7 800 | $35 000 |
Receivables | 6 000 | 20 000 |
Inventories | 20 000 | 50 000 |
Deferred tax assets | 10 200 | — |
Machinery | 15 000 | 15 000 |
Plant and equipment | 113 000 | 300 000 |
Land | 25 000 | 50 000 |
Furniture | 7 000 | 8 000 |
Trademark | — | 100 000 |
Goodwill | — | 25 000 |
Cost of sales | 162 000 | 128 000 |
Other expenses | 53 000 | 41 000 |
Income tax expense | 20 000 | 18 000 |
Interim dividend paid | 12 000 | 10 000 |
Final dividend declared | 6 000 | 4 000 |
Loan to Bat Ltd | 12 000 | — |
$794 000 | $804 000 | |
Credit balances | ||
Share capital | $312 000 | $200 000 |
General reserve | 20 000 | 25 000 |
Retained earnings (1/7/19) | 30 000 | 45 000 |
Final dividend payable | 6 000 | 4 000 |
Current tax liabilities | 8 000 | 2 500 |
Provisions | 78 000 | 169 500 |
Loan from Ghost Ltd | — | 12 000 |
Sales | 220 000 | 182 000 |
Other income | 62 000 | 20 000 |
Gains(losses) on sale of non-current assets | 22 000 | 25 000 |
Accumulated depreciation – plant and equipment | 34 000 | 114 000 |
Accumulated depreciation – machinery | 1 000 | 3 000 |
Accumulated depreciation – furniture | 1 000 | 2 000 |
$794 000 | $804 000 |
Required
- Prepare the consolidation journal / worksheet entries for Ghostbusters Ltd for 30/6/2020.
- Update and complete the consolidation worksheet for 30/6/2020. Use the worksheet provided below
Financial Statements | Ghost
Ltd |
Bat
Ltd |
Adjustments | Group | |||
Dr | Cr | ||||||
Sales revenue | 220 000 | 182 000 | |||||
Other income | 62 000 | 20 000 | |||||
282 000 | 202 000 | ||||||
Cost of sales | 162 000 | 128 000 | |||||
Other expenses | 53 000 | 41 000 | |||||
215 000 | 169 000 | ||||||
Trading profit | 67 000 | 33 000 | |||||
Gains/losses on sale of non-current assets | 22 000 | 25 000 | |||||
Profit before tax | 89 000 | 58 000 | |||||
Tax expense | 20 000 | 18 000 | |||||
Profit | 69 000 | 40 000 | |||||
Retained earnings
(1/7/19) |
30 000 | 45 000 | |||||
Transfer from BCV reserve | 0 | 0 | |||||
99 000 | 85 000 | ||||||
Dividend paid | 12 000 | 10 000 | |||||
Dividend declared | 6 000 | 4 000 | |||||
18 000 | 14 000 | ||||||
Retained earnings
(30/6/20) |
81 000 | 71 000 | |||||
Share capital | 312 000 | 200 000 | |||||
General reserve | 20 000 | 25 000 | |||||
BCVR | – | – | |||||
Total Equity | 413 000 | 296 000 | |||||
Deferred tax liabilities | – | – | |||||
Dividend payable | 6 000 | 4 000 | |||||
Current tax liability | 8 000 | 2 500 | |||||
Loan from Ghost Ltd | – | 12 000 | |||||
Provisions | 78 000 | 169 500 | |||||
Total Liabilities | 92 000 | 188 000 | |||||
Total Liabilities + Equity | 505 000 | 484 000 |
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at info@myassignmentguru.com with your version of question.