Assignment
Problem 1
The financial statements of B Ltd and C Ltd at 30 June 2014 are set as follows:
|
Statement of Comprehensive Income
|
B Ltd
|
C Ltd
|
|
Income:
|
$
|
$
|
|
Opening inventory
|
29 700
|
43 200
|
|
Purchases
|
717 938
|
504 285
|
|
Closing inventory
|
42 400
|
27 800
|
|
Cost of sales
|
705 238
|
519 685
|
|
Sales revenue
|
963 400
|
742 200
|
|
Gross profit
|
258 162
|
222 515
|
|
Other Income:
|
44 000
|
-
|
|
Dividend income
|
22 500
|
-
|
|
Administration fee
|
21 500
|
-
|
|
|
302 162
|
222 515
|
|
Expenses:
|
208 362
|
148 515
|
|
Admin and other expenses
|
123 546
|
95 045
|
|
Depreciation
|
19 360
|
15 640
|
|
Other expenses
|
65 456
|
37 830
|
|
Profit before tax
|
93 800
|
74 000
|
|
Tax exp.
|
30 954
|
24 420
|
|
Profit/surplus after tax
|
62 846
|
49 580
|
|
Dividends proposed & paid
|
40 000
|
30 000
|
|
Retained earnings for the year
|
22 846
|
19 580
|
|
Statement of Financial Position
|
|
|
Equity and liabilities
|
|
|
|
Contributed capital
|
270 000
|
150 000
|
|
Revaluation surplus
|
-
|
50 000
|
|
Retained earnings
|
67 170
|
102 780
|
|
Long-term loan
|
-
|
93 030
|
|
Accounts payable
|
25 670
|
29 546
|
|
Taxation payable
|
30 954
|
24 420
|
|
Dividends payable
|
28 000
|
20 000
|
|
|
421 794
|
469 776
|
|
Assets
|
|
|
|
Non-current assets
|
154 677
|
392 601
|
|
Investment in C Limited
|
171 820
|
-
|
|
Inventory
|
42 400
|
27 800
|
|
Accounts receivable
|
33 450
|
45 609
|
|
Dividends receivable
|
15 000
|
-
|
|
Cash
|
4 447
|
3 766
|
|
|
421 794
|
469 776
|
Additional information:
a) On 1 July 2010, B Ltd acquired 75% of the contributed equity of C Ltd. At that date the equity of C Ltd comprised:
Contributed equity $150 000
Retained earnings $36 760
Revaluation reserve $29 000
b) At the time acquisition, all assets were considered to be fairly valued.
c) Included in C Ltd's administrative expenses is an amount of $21 500 paid to B Ltd for providing management and administrative service for the year.
d) During the year, C Ltd made sales to B Ltd amounting to $84 500; C Ltd had always sold goods to B Ltd at a mark-up of 25% on cost.
e) On 30 June 2014, the directors decided that goodwill arising on the acquisition on B Ltd had been impaired by 40%.
f) Inventory at 30 June 2014 was as follows:
B Ltd $42 400
C Ltd $27 800
g) Of the inventory B Ltd had on hand at 30 June 2013, $12 600 was purchased from C Ltd.
h) Of the inventory B Ltd had on hand at 30 June 2014, $15 400 was purchased from C Ltd.
i) On 30 June 2014, a final dividend amounting to $28 000 was provided by B Ltd, while $20,000 was provided by C Ltd, and the decision to pay the dividend communicated to shareholders on that date. B Ltd has recognised its share of the dividend receivable from C Ltd in its financial statements on 30 June 2014.
j) Tax is charged at a rate of 40%.
Required:
1. Complete the acquisition analysis on 1 July 2010 for B Ltd's investment in C Ltd as required by AASB3 and AASB10 and determine the amount of goodwill or gain on bargain purchase following the proportional/partial goodwill method.
2. Prepare the acquisition journal entries on 1 July 2010.
3. Prepare all consolidated journal entries including non-controlling interest and their posting to consolidated worksheet for the year ended 30 June 2014 for consolidation purpose of B Ltd and C Ltd.