Assignment Question
Besar Ltd acquired all of the shares in Kecil Ltd on 1 July 2015. At that date, equity of Kecil Ltd consisted of:
|
Share Capital
|
$2 000 000
|
|
Retained earnings
|
800 000
|
At 1 July 2015, all the assets and liabilities of Kecil Ltd were recorded at amounts equal to fair value except for the following:
|
|
Carrying amount
|
Fair value
|
|
Inventory
|
$120 000
|
$150 000
|
|
Land
|
500 000
|
520 000
|
|
Plant (cost $300,000)
|
180 000
|
200 000
|
Inventory was sold in January 2016. The remaining useful life of the plant at date of acquisition is 5 years.
During the period 1 July 2015 and 30 June 2017, the following intragroup transactions have occurred:
1. For the year ending 30 June 2017, Besar Ltd made total sales to Kecil Ltd of $100,000, while Kecil sold $45,000 worth of inventory to Besar Ltd.
2. On 1 January 2016, Kecil Ltd sold an item of plant to Besar Ltd at $80,000. Kecil Ltd recorded gain on sale of plant of $10,000. The plant is assessed as having a remaining useful life of four years.
3. Ending inventory in Besar Ltd at 30 June 2017 consists of inventory acquired from Kecil Ltd at a cost of $15,000. This cost Kecil Ltd $13,000 to produce.
4. On 1 July 2016, Besar Ltd provided a $100,000 loan to Kecil Ltd. The interest rate on this loan is 10% and interest is paid semi-annually on 1 January and 1 July each year. No principal repayment has been made.
The following financial statements of Besar Ltd and its subsidiary, Kecil Ltd have been extracted from their financial records at 30 June 2017.
Statement of Financial Performance
|
Besar Ltd |
Kecil Ltd |
| Sales revenue |
326 000 |
168 000 |
| Costs of goods sold |
148 000 |
30 000 |
| Gross profit |
178 000 |
138 000 |
| Dividends revenue |
50 000 |
- |
| Management fees revenue |
2 000 |
- |
| Gain on sale of plant |
8 000 |
- |
| Interest revenue |
15 000 |
|
| Expenses: |
|
|
| Administrative expenses |
12 000 |
1 000 |
| Depreciation |
25 000 |
5 000 |
| Rental expenses |
9 000 |
3 000 |
| Interest expenses |
10 000 |
10 000 |
| Profit before tax |
197 000 |
119 000 |
| Income tax expense |
45 000 |
22 000 |
| Profit for the year |
152 000 |
97 000 |
| Dividends paid |
18 000 |
8 000 |
| Dividends declared |
15 000 |
12 000 |
Statement of Financial Position
|
Besar Ltd |
Kecil Ltd |
| Current assets |
|
|
| Cash |
230 000 |
210 000 |
| Accounts receivable |
150 000 |
120 000 |
| Inventory |
490 000 |
500 000 |
| Dividend receivable |
50 000 |
|
| Interest receivable |
20 000 |
|
| Non-current assets |
|
|
| Deferred tax assets |
20 000 |
|
| Loans receivable |
100 000 |
- |
| Land |
5 000 000 |
1 200 000 |
| Plant |
12 000 000 |
2 000 000 |
| (-) Accumulated depreciation |
(4 500 000) |
(800 000) |
| Investment in Kecil Ltd |
3 000 000 |
- |
| TOTAL ASSETS |
16 560 000 |
3 230 000 |
|
|
|
| Current liabilities |
|
|
| Accounts payable |
153 000 |
26 000 |
Required:
1. Prepare consolidated worksheet entries for the preparation of the consolidated financial statements of Besar Ltd at 30 June 2017. Besar Ltd applies the partial goodwill method.
(Hint: Provide clear references to each entry for easy identification in the worksheet. Marks will be deducted if no reference is made).
2. Prepare consolidation worksheet for Besar Ltd for the preparation of the consolidated financial statements of Besar Ltd at 30 June 2017.
(Hint: Provide clear references to each entry for easy identification in the worksheet. Marks will be deducted if no reference is made).
3. Prepare the consolidated financial statements of Besar Ltd for the year ended 30 June 2017 in accordance to AASB 101 Presentation of Financial Statements.
(Hint: expenses are classified according to function (Para 103 AASB 101). All categories of revenue as referred to in Para 35(b) AASB 118 are considered insignificant and shall not be disclosed. Notes to the accounts are not required).