Consolidation questions

Problem 3-38 (LO 3-4, 3-6) On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of $130,869,000 in cash and stock. Lydia’s assets and liabilities equaled their fair values except for its equipment, which was undervalued by $690,000 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia’s artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia’s assets and liabilities (including $55,551,000 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair…

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ACC204 – Advanced Financial Accounting

On 1 July 2015 Kruger Ltd privately issues $1 million in six-year debentures, which pay interest each six months at a coupon rate of 6 per cent per annum. At the time of issuing the securities, the market requires a rate of return of 4 per cent. Consistent with the requirements of AASB9, the debentures are accounted for using the effective interest method. Required (a)  Determine the fair value of the debentures at the time of issue (which will also be their issue price). (b) Provide the journal entries at: (i)         1 July 2015 (ii)        31 December 2015 (iii)       30 June 2016.   Sun City Limited commences construction of a multi-purpose water park on 1 July 2014 for Pretoria Limited. Sun…

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Consolidation: Principles and accounting requirements and Intra-group transactions

All workings, when appropriate, must be shown to substantiate your answers. Question 1 [20 marks]   Topic 1: Consolidation: Principles and accounting requirements   On 1 July 2017, Patience Ltd acquired all the issued shares of Silence Ltd for a cash consideration of $1,000,000. At that date, the financial statements of Silence Ltd showed the following information.   Share capital                             650,000 General reserve                         20,000 Retained earnings                      250,000   All the assets and liabilities of Silence Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50,000 below its fair value with a related accumulated depreciation of $80,000. Silence Ltd accounted for all its property, plant and equipment in its own…

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FNS50215 Diploma of Accounting (FNSACC507 Provide Management Accounting Information)

A business sells two products and provided the following budget information for your analysis and comments: Items Gamma Delta Sales (units) 4 800 3 200 Selling price per unit $20 $30 Variable cost per unit $12 $15 Total fixed costs (for both) $ 62,100     The manager of the business has noticed that Delta has a higher contribution margin per unit than Gamma and wants to investigate the impact on profits if the two items were sold in a ratio of 50:50. Required: What profit is expected based on the current sales mix? What is the break-even point on the current sales mix? What would be the expected profit in the two items were sold in the proportion 50:50? What…

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The Chilled Leisure Company (CLC) has decentralised

FINANCIAL PERFORMANCE MEASURES – WEEK 8 The Chilled Leisure Company (CLC) has decentralised the operation decision-making of its divisional units. The Chief Operating Manager for each of these business units is given a great deal of freedom in their decision making however, the company offers bonuses of up to 100% of their annual fixed salary for achieving high profit returns and at the same time, carefully managing the amount of capital they use in their divisions.   CLC uses traditional performance measures such as Return on Investment (ROI) or simple Profit measures. CLC’s Chief Executive and Chairman believe profit-based measures are still the most important measure because that is what shareholders want. The results for 2016 for CLC’s Hotels and Casino…

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PEACE Ltd purchased 448,500 shares of MIEL Ltd at a price of 1.95 per share

Group Accounting – Consolidation (100 Marks in total) On 1 July 2014, PEACE Ltd purchased 448,500 shares of MIEL Ltd at a price of 1.95 per share. On that day, the retained earnings of MIEL Ltd was 280,000. At the time of acquisition, MIEL Ltd recorded all its assets at their fair values except for an item of plant and some land. PEACE Ltd considered that an item of plant shown in the accounts of MIEL Ltd was less than the fair value. The fair value should be 50,000 not 44,000 as shown in MIEL Ltd’s accounts. The plant was assessed to have a remaining useful life of 6 years and was to be depreciated on a straight-line basis. The land…

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(New) Consolidation worksheet entries – Ben Ltd operates a number of supermarkets

  Q1 Consolidation worksheet entries   Ben Ltd operates a number of supermarkets with an emphasis on the supply of quality produce The operations of Sam Ltd are primarily in the fine fruit market. Believing that the acquisition of Sam Ltd would enable Ben Ltd to expand its supply of quality produce to its customers, Ben Ltd commenced actions to acquire the shares of Sam Ltd. On 1 July 2013, Ben Ltd acquired all the issued shares (cum div.) of Sam Ltd for $130 000. At this date the equity of Sam Ltd consisted of:                           Share capital                           $150 000                         Reserves                                    10 000                         Retained earnings                      30 000   On 1 July 2013, Sam Ltd had recorded a…

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ACCT6003 Financial Accounting Processes – On 1 July 2012, ChiHerbal Ltd was incorporated and on the same day the company

ACCT6003 Financial Accounting Processes   Scenario 1 Financing Company Operations (20 marks) On 1 July 2012, ChiHerbal Ltd was incorporated and on the same day the company issued a prospectus inviting applications for 97 000 ordinary shares. These shares had an issue price of $11 per share, payable $5.50 on application, $2.80 on allotment and $1.35 on each of two calls to be made at intervals of 4 months after the date of allotment. By 31 July, the company received applications for 114 000 shares. On 3 August, the Board of directors allotted 97 000 ordinary shares to the applicants in proportion to the number of shares for which applications had been made. The directors decided to offset the surplus application money against the amount…

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Merton Shovel Corporation has decided to bid for a contract to supply shovels

Merton Shovel Corporation has decided to bid for a contract to supply shovels to the Honduran Army. The Honduran Army intends to buy 1,400 shovels per year for the next 3 years. To supply these shovels, Merton will have to acquire manufacturing equipment at a cost of $160,000. This equipment will be depreciated on a straight-line basis over its five-year lifetime. At the end of the third year, Merton can sell the equipment for exactly its book value ($64,000). Additional fixed costs will be $40,000 per year, and variable costs will be $4 per shovel. An additional investment of $23,400 in net working capital will be required when the project is initiated. This investment will be recovered at the end of…

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Huebert Company provided the following information for last year:

Huebert Company provided the following information for last year:
Beginning inventories:
Direct materials …………………….$ 52,700
Work in process ……………………. 25,000
Finished goods ……………………… 75,000
Ending inventories:
Direct materials …………………….$ 42,700
Work in process ……………………. 50,000
Finished goods …………………….. 140,000
During the year, direct materials purchases amounted to $270,000, direct labor cost was $304,000, and overhead cost was $506,000. During the year, 25,000 units were completed.

Required:
1. Calculate the total cost of direct materials used in production.
2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost.
3. Of the unit manufacturing cost calculated in Requirement 2, assume $11 is direct materials and $12 is direct labor. What is the prime cost per unit? Conversion cost per unit?

Aussie Ltd is an Australian company for which the Australian dollar is the functional

ACC567 Financial Accounting 2 Question 3 – Foreign currency transactions Aussie Ltd is an Australian company for which the Australian dollar is the functional and presentation currency. The company has entered into a number of foreign activities, and these include the following: (a) Aussie Ltd sold inventory to a customer in Hong Kong for HK$600,000. The order was received on 10 May 2016, with delivery made on 30 May 2016. Under the conditions of the contract, title to the goods passed to the customer on delivery. Payment in respect of these inventories was received on 19 July 2016. The following exchange rates are applicable: 10 May 2016:      A$1.00  = HK$7.30 30 May 2016:      A$1.00  = HK$8.20 30 June 2016:     A$1.00  = HK$8.60 19…

On 1 July 2015, Richmond Ltd acquired 40% of the share capital of Carlton Ltd

ACC567 Financial Accounting 2 Question 2 – Accounting for associates On 1 July 2015, Richmond Ltd acquired 40% of the share capital of Carlton Ltd, for $160,000. The equity of Carlton Ltd on that date was: Share capital $250,000 Retained earnings $95,000 All of the identifiable net assets of Carlton Ltd were recorded at fair value. The following information is provided for Carlton Ltd for the year ended 30 June 2017: $ Operating profit before tax 380,000 Income tax expense (114,000) Operating profit after tax 266,000 Retained earnings at 1 July 2016 257,000 Dividends paid (100,000) Retained earnings at 30 June 2017 423,000 Additional information: The closing inventory of Richmond Ltd included goods purchased from Carlton Ltd during the year for $6,000. Their…