Company Accounting Assessment: Financial statements and Consolidations

This assessment task is divided into two parts.

Assessment details: Part A (individual submission)

Part A, Match the business, requires you to take the role of business analyst in reverse: identify companies by type and prepare appropriate financial statements. You will see extracts of the financial information of five companies in Table 2 and also five different business descriptions in Table 1. You will be required to work backwards to match up the financial information with the business descriptions.

Business Descriptions for the five companies

Table 1 shows brief business descriptions for the five companies.

Table 1: Descriptions of the five companies (2016) created by Swinburne Online

You are required to complete three tasks for Part A with a total of 1500 words (+/-10%).

1. Match the numbered balance sheets extracts to the letter descriptions of the companies (A-E). That is, match the numbers to the letters.

Provide reasons for how you chose the match. In particular, what specific line items did you focus on and why?

2. Prepare appropriate statutory financial statements for any ONE of the companies on the list. Notes to statements are not required, but may be included if deemed necessary. (We suggest that you replace the percentage amounts with dollar amounts).

3. Explain the significance of the following quote using examples if you like:

The disclosure of immaterial information reduces understandability of financial statements because immaterial information can obscure and detract from the useful information that is reported.'

Assessment details: Part B (team submission)

Acquisition of Stoney Ltd

On 1 January 2X11, Hardy Ltd acquired 75% of the ordinary share capital (ex div) of Stoney Ltd for $3,750,000. At this date, the accounts of Stoney Ltd included the following balances:

• Share capital (3,000,000 ordinary shares): $3,000,000
• General reserve: $850,000
• Retained profits: $500,000

All of the identifiable net assets of Stoney Ltd were recorded at fair value except for land, which had a fair value of $300,000 above the carrying amount. Adjustments for the differences are made on consolidation, and tax-effect entries are needed.

The following is a list of the information and transactions relating to the companies for the year ended June 2X16.

• On 1 June 2X16, Stoney sold inventory to Hardy Ltd for $450,000, at a mark-up of 40%. At 30 June 2X16, $210,000 of this inventory was still on hand.
• Stoney Ltd sold land to Hardy Ltd in December 2X15. The land had originally cost Stoney Ltd $200,000, but was sold to Hardy Ltd for only $160,000. As part of the sale contract, Stoney Ltd gave Hardy Ltd an interest-free loan of $90,000, and the balance was paid in cash. Hardy Ltd has as yet made no repayments on the loan.
• Late in the previous financial year, Hardy Ltd sold some inventory to Stoney Ltd for $85,000, at a before tax loss of $10,000. The stock remained on hand in the books of Stoney Ltd at 30 June 2X15, but was all sold by 30 June 2X16.
• On 1 March 2X15, Stoney Ltd rented a spare warehouse to be used jointly by Hardy Ltd and AAA Ltd (an unrelated company) with each company paying half the agreed rent to Stoney Ltd. On this transaction, the total rent received by Stoney Ltd in the 2X14-2X15 year was $7,500 while the rent received in the 2X15-2X16 year was $35,000.
• On 1 July 2X15, Hardy Ltd sold an item of machinery to Stoney Ltd for $190,000. This item had cost Hardy Ltd $60,000. Hardy Ltd regarded this item as inventory whereas Stoney Ltd intended to use it as a non-current asset. Stoney Ltd charges depreciation at the rate of 10% p.a. on cost.
• A goodwill impairment test at 30 June 2X16 revealed the need to impair goodwill by $15,000. Impairment of goodwill from previous years amounts to $77,500. For consolidation purposes the partial goodwill method is used.
• All dividends are recognised before receipt of cash.
• The corporate income tax rate is 30% and the companies in the group have financial years from 1 July to 30 June.

Your pair is required to complete two tasks for Part B.

Consolidate Hardy Ltd and Stoney Ltd:

1. Prepare the consolidation journal entries, with narrations, and consolidated worksheet (using Excel or similar) to consolidate Hardy Ltd and Stoney Ltd for the year ended 30 June 2X16.

2. Produce the completed consolidated financial reports (Statement of Comprehensive Income and Statement of Financial Position) for the year ended 30 June 2X16.

Please note that in preparing the financial statements for this assignment, your pair is advised to comply with AASB standards and the requirements in the Australian Corporations Legislation when determining the structure and presentation requirements for the financial reports.

Attachment:- Accounting Assessment.rar