2103AFE Company Accounting
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2103AFE Company Accounting
Group Assignment
T1 2018
This assignment requires students to prepare the consolidated financial statements in
accordance with AASB 10 Consolidated Financial Statements.
DUE DATES:
Assignment: 18 May, 2018
SPARK ratings: 25 May, 2018
TOTAL WEIGHTING: 20%
This piece of assessment task will consist of Part A- Group work (10%) and Part B- Self &
Peer assessment (10%).
Part A (10%). The aim of Part A is to apply the knowledge and understanding of Consolidation
from lectures and workshops in a practical and detailed manner. The assignment is to be
completed in groups of three or four. Students will sign up in a group on Learning@Griffith
from Week 4.
Part B (10%). This assignment involves the completion of Self and Peer Assessment Ratings
and feedbacks using SPARKplus. All information pertaining to SPARKplus is located in the
Learning@Griffith course site under Assessment
SPARKplus Student Resources.
Please see the attached ru
ic for Part B that shows you how the ratings will be assessed.
Students who do not rate to their peers (group members) or provide feedback to their peers,
will receive 0% in the assessment.
REQUIREMENTS:
1. Students are required to complete Assignment in a group.
2. All answers must use proper English, expression and grammar. The assignment must be
word-processed using Microsoft Word or Excel, Times New Roman, 12 point font.
3. Students must complete the Self & Peer Assessment Resource Kit (SPARK) Ratings of
themselves and each of the group members [see Part B above for details]. Final ratings
must be completed by the due date shown above.
4. The assignment is to be submitted on-line by the due date.
SUBMISSION:
1. Detailed instructions on how to submit the assignment is available in the Course Home
Ta
Assignment Submission on Learning@Griffith.
2. Only one group assignment is to be submitted by the group (only one member submits
the assignment on behalf of the group).
3. The assignment should be submitted on-line through the assignment submission tab
available on Learning@Griffith and only one assignment is to be submitted per group
and each group member must complete the electronic assignment cover sheet. Please
efer to Learning@Griffith for further details.
4. Each group member must complete an Academic Integrity Declaration.
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Assignment (50 marks in total)
Consolidation Case Study: Sky Ltd and River Ltd
Sky Ltd acquired 80% of the share capital of River Ltd on 1 July 2012. The following equity
alances appeared in the records of River Ltd at the date of acquisition:
Share capital (210,000 shares) $210,000
General reserve 6,100
Retained earnings 75,000
Financial information at 30 June 2017 of Sky Ltd and its subsidiary company, River Ltd, is
shown below.
Sky Ltd
River Ltd
$ $
Sales revenue 708, XXXXXXXXXX,000
Cost of sales (273, XXXXXXXXXX,500)
Gross Profit 435, XXXXXXXXXX,500
Other revenue:
Debenture interest — 10,500
Management fees 10,500 —
Dividend from River Ltd 16,800 —
462,300
324,000
Administrative expenses (31, XXXXXXXXXX,800)
Distribution expenses (189, XXXXXXXXXX,000)
Depreciation on machinery (31, XXXXXXXXXX,500)
Finance expenses (27, XXXXXXXXXX,000)
Other expenses (29, XXXXXXXXXX,200)
Total operating expenses (309, XXXXXXXXXX,500)
Profit before tax 153, XXXXXXXXXX,500
Income tax expense (52, XXXXXXXXXX,500)
Profit after tax 100,800 78,000
Retained earnings (1/7/ XXXXXXXXXX, XXXXXXXXXX,500
205,800
172,500
Transfer to general reserve (6,300) —
Interim dividend paid (31, XXXXXXXXXX,000)
Final dividend declared (37, XXXXXXXXXX,000)
(75, XXXXXXXXXX,000)
Retained earnings (30/6/ XXXXXXXXXX, XXXXXXXXXX,500
General reserve 105,000 36,000
Other components of equity (1/7/ XXXXXXXXXX,300 21,000
Share capital 630, XXXXXXXXXX,000
Liabilities:
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Debentures 255,000 60,000
Defe
ed tax liability — 14,700
Cu
ent tax liability 52,500 35,700
Dividend payable 37,800 42,000
Other cu
ent liabilities 189, XXXXXXXXXX,200
1,426, XXXXXXXXXX,100
Cash and cash equivalents 107,100 6,000
Trade receivables 68,250 40,200
Inventory 189,000 58,500
Debentures in Sky Ltd 105,000
Shares in River Ltd 270,000 —
Machinery (cost) 252, XXXXXXXXXX,200
Accumulated depreciation – machinery (136, XXXXXXXXXX,500)
Other depreciable assets 159, XXXXXXXXXX,500
Accumulated depreciation (84, XXXXXXXXXX,500)
Defe
ed tax asset 179,250 63,000
Land 422, XXXXXXXXXX,700
1,426, XXXXXXXXXX,100
Additional information
i. At 1 July 2012, all the identifiable assets and liabilities of River Ltd were recorded at
fair value except for the following assets:
Ca
ying amount Fair value
Land $61,500 $79,500
Machinery (cost 135, XXXXXXXXXX, XXXXXXXXXX,000
Receivable 40,000 34,000
The machinery has an expected life of 10 years, with benefits being received evenly
over that period. Differences between ca
ying amounts and fair values are adjusted on
consolidation. The land on hand at 1 July 2012 was sold on 1 March 2014 for $84,000.
Any valuation reserve in relation to the land is transfe
ed on consolidation to retained
earnings. By 30 June 2013, receivables had all been collected.
ii. Sky Ltd uses the full goodwill method. The fair value of the non-controlling interest at
1 July 2012 was $66,000.
iii. Opening inventory of River Ltd includes unrealised profit of $4,800 on inventory sold
y Sky Ltd. It was all sold by River Ltd during the year.
iv. During the year, intragroup sales by River Ltd to Sky Ltd were $80,000. The mark-up
on cost of all sales was 25%. At 30 June 2017, Sky Ltd’s inventory included $35,000
of items acquired from River Ltd.
v. On 1 January 2017, River Ltd sold an item of inventory to Sky Ltd for $18,000 at a
profit before tax of $3000. Sky Ltd had treated this item as an addition to its machinery
and depreciated at 10% p.a. straight-line.
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vi. On 1 April 2017, Sky Ltd sold $15,000 worth of inventory to River Ltd. The cost of
this inventory was $9000. By 30 June 2017, River Ltd had sold 60% of the inventory
to outside entities.
vii. Some of the items manufactured by River Ltd are used as machinery by Sky Ltd. One
of the machinery items held by Sky Ltd at 30 June 2017 was purchased from River Ltd
on 1 January 2016. It had cost River Ltd $17,500 to manufacture this item and was sold
to Sky Ltd for $25,000. Sky Ltd depreciates such items at 10% p.a. on cost.
viii. Management fees derived by Sky Ltd were all from River Ltd and represented charges
made for administration.
ix. The tax rate is 30%.
Required:
a) Prepare the acquisition analysis at 1 July XXXXXXXXXXmarks)
) Prepare the consolidation journal entries, including:
- The business combination valuation entries; (6 marks)
- The pre-acquisition entries; (5 marks)
- The intra-group entries; (15 marks)
c) Calculate NCI share of equity at following dates and prepare the journal entries:
- 1 July 2012; (3 marks)
- 1 July 2012 – 30 June 2016; (4 marks)
- 1 July 2016 – 30 June XXXXXXXXXXmarks)
d) Prepare the consolidation worksheet as at 30 June XXXXXXXXXXmarks)
Note: Please show all workings. Consolidated journals, worksheet and all calculation
should be presented in the same format as used in Leo, et al., 11ed XXXXXXXXXXtextbook.
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2103AFE Company Accounting
2103AFE Company Accounting Group Assignment
T1 2018
Solutions:
A. Acquisition analysis at 1st July 2012.
At 1st July 2012:
Net Fair Value of identifiable assets, liabilities and contingent liabilities of River Ltd (80%)
NFVINA
Share Capital $210,000
General Reserve $6,100
Retained Earnings $75,000
Total $291,100
Land ($79,500-$61,500) x (1-30%) = $12,600
Machinery ($120,000-$105,000) x (1- 30%) = $10,500
Receivable ($34,000 - $40,000) x (1 – 30%) = -$4,200
Total Fair Value Adjustments $18,900
Total NFVINA $310,000
i. Consideration Transfe
ed $270,000
ii. NCI in Subsidiary $66,000
Aggregate of (i) & (ii) $336,000
Total Goodwill on acquisition
$336,000 - $310,000 = $26,000
Goodwill of River Ltd
FV of River Ltd
$66,000.00/20%= $330,000
NFVINA of River Ltd $310,000
Goodwill of River Ltd $20,000
Goodwill of Sky Ltd
Total Goodwill Acquired $26,000
Goodwill of River Ltd $20,000
Goodwill of Sky Ltd – Control Premium $6,000
B. Prepare the consolidation journal entries, including:
1. The Business combination valuation entries:
Description
DR
CR
Accumulated Depreciation – Machinery (135,000 – 105,000)
$30,000
XXXXXXXXXXMachinery (135,000 – 120,000)
$15,000
XXXXXXXXXXDiffered Tax Liability ($120,000 – $105,000) x 30%
$4,500
XXXXXXXXXXBCVR
$10,500
Depreciation expense ($15,000/10years)
$1,500
Retained Earnings
$12,000
XXXXXXXXXXAccumulated Depreciation – Machinery
$13,500
Defe
ed Tax Liability (13,500 x 30%)
$4,050
XXXXXXXXXXIncome Tax Expense ($1,500 x 30%)
$450
XXXXXXXXXXRetained Earnings
$3,600
Goodwill
$20,000
XXXXXXXXXXBCVR
$20,000
Land
$18,000