Question 1
On 1 July 2014 Kam Ltd acquired all the share capital of Maria Ltd when the equity of Maria Ltd consisted of the following:
100 000 ordinary shares issued at $1 paid to 75c each $75 000
General Reserve 15 000
Retained Earnings 12 000
All identifiable assets and liabilities of both companies were recorded at fair value except:
Carrying Amount Fair Value
Inventory $20 000 $25 000
Machinery (net) 80 000 95 000
The machine has a further 5 year life. Of the inventory on hand at 1 July 2014, 90% was sold by December 2014. At 1" July 2014 Maria Ltd was involved in a court case with an entity that was claiming damages from it. Maria ltd had not raised the liability in relation to expected damages. Kam Ltd measured the fair value of the liability at $5 000. By 31st December 2014 the expectation of winning the court case had improved, so the fair value considered to be $ 1 000.
The tax rate is 30%. Valuation adjustments are made on consolidation. On 1 November 2014 Kam Ltd transferred $6 500 out of Retained Earnings in existence at 1 July 2014 to General Reserve account.
On 1 December 2014, Maria Ltd made a call of 25 c per share; all call money being received by 20th December 2014. At 31 December 2014 the statement of Financial position of Kam Ltd showed shares in Maria Ltd at $147 250.
REQUIRED
Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements for Kam Ltd and its subsidiary Maria Ltd, as at 31 December 2014. Show all workings.
Question 2
Statement of profit or loss and other comprehensive income (classify expenses by function), statement of financial position and statement of changes in equity.
The trial balance of Black Hole Ltd at 30 June 2018 was as follows:
| |
Debit |
Credit |
|
Share capital (ordinary
|
|
$ 200 000
|
|
share$2, fully paid)
|
|
25 000
|
|
General reserve
|
|
128 400
|
|
Retained earnings (1/7/17)
|
|
85 000
|
|
Revaluation surplus
|
|
250 000
|
|
Mortgage loan
|
|
69 200
|
|
Bank overdraft (at call)
|
|
80 000
|
|
7% debentures
|
|
2 800
|
|
Interest payable
|
|
69 500
|
|
Accounts payable
|
|
10 000
|
|
Dividend payable
|
|
52 100
|
|
Current tax liability
|
|
34 200
|
|
Provision for employee
|
|
18 400
|
|
benefits
|
|
12 800
|
|
Deferred tax liability
|
|
42 500
|
|
Allowance for doubtful
|
|
10 000
|
|
debts
|
$ 500
|
|
|
Accumulated depreciation
|
58 000
|
|
|
- plant & Equip
|
87 700
|
|
|
Accumulated impairment - goodwill
|
7 000
|
|
|
Cash
|
|
|
|
Accounts receivable
|
|
|
|
Inventory
|
|
|
|
Prepaid insurance
|
|
|
|
Plant and equipment
|
222 500
|
|
|
Land
|
220 000
|
|
|
Buildings
|
380 000
|
|
|
Goodwill
|
105 000
|
|
|
Deferred tax asset
|
9 800
|
|
|
Sales revenue
|
|
825 000
|
|
Cost of sales
|
450 000
|
|
|
Administrative expenses
|
265 000
|
|
|
Other expenses
|
10 000
|
|
|
Interest revenue
|
|
2 500
|
|
Dividends revenue
|
|
3 500
|
|
Income tax expense
|
50 400
|
|
|
Dividends paid
|
20 000
|
|
|
Dividends declared
|
10 000
|
|
|
Transfer to general reserve
|
25 000
|
|
|
|
$1 920 90
|
$1 920 900
|
|
|
0
|
|
Additional information
(a) Administrative expenses for the year include interest expense of $28 700.
(b) All assets are carried at cost, except for land and buildings which are carried at valuation.
(c) During the year, 50 000 shares were issued at an issue price of $2 each, payable in full on application.
(d) On 30 June 2018, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.
(e) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.
(f) The 7% debentures are to be redeemed on 31 March 2019. There is no plan to refinance these debentures in the future.
(g) The provision for employee benefits consists of:
Annual leave $18 000
Long-service leave 16 200
(h) No employee is eligible for long-service leave until 2022.
(i) The company tax rate is 30%.
Required
A. Prepare a statement of profit or loss and other comprehensive income for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101 (classify expenses by function).
B. Prepare a statement of financial position for Black Hole Ltd as at 30 June 2018 to comply with AASB 101.
C. Prepare a statement of changes in equity for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101.
[Comparative information must be disclosed in respect of the preceding period for all amounts reported in the current period's financial statements in accordance with AASB 101 paragraph 38. However this information is not provided in the question].