CORPORATE ACCOUNTING
INSTRUCTIONS
QUESTION
The marking criteria is shown on the Data tab of the spreadsheet
Question requires you to complete necessary journal entries, non controlling interest calculations, complete the spreadsheet adustments, prepare the consolidated income statement, balance sheet, and changes in statement of equity.
ASSIGNMENT AIDS
DATA
item Aspect Event Data
1 Acquisiton of Subsidiary by Parent Acquisiton date of Subsidiary by the Parent 1/07/2X18
2 % ownership of Parent in Subsidiary 62
3 Subsidiary Share Capital at acquisition date $1,500,000
4 Subsidiary Retained Earnings at acquisition date $300,850
5 Fair value adjustment at acquisition date At acquisiton date, the fair value of Plant Touch-U in Subsidiary is $1,670
6 Cost of Plant Touch-U is $1,370
7 At acquisition date, accumulated Depreciation of Plant Touch-U $970
8 At acquision date, the remaining useful life in years of Plant Touch U 4
9 Intra-group service transaction Subsidiary pays management fees to Parent during the financial year. This item is included in ‘other’ income and expenses $5,850
10 Intra-group inventory transaction: Parent sell inventory (Type-High) to subsidiary in current period During the current financial year Parent Ltd sold inventory to Subsidiary Ltd at a price of $26,700
11 The inventory cost Parent to produce $18,700
12 % of this inventory is still on hand with Subsidiary Ltd at the end of the financial year. 54
13 Intra-group inventory transaction: Subsidiary sell inventory (Type-Low) to Parent in current period During the current financial year Subsidiary Ltd sold inventory to Parent Ltd at a price of 23,400
14 The inventory cost Subsidiary to produce $17,400
15 % of this inventory is still on hand with Parent Ltd at the end of the financial year. 44
16 Intra-group inventory transaction: Subsidiary sell inventory (Type Rich) to Parent in previous period brought into the current period During the current financial year Subsidiary Ltd sold inventory to Parent Ltd at a price of $14,400
17 The inventory cost Subsidiary to produce $11,400
18 % of this inventory is still on hand with Parent Ltd at beginning of the financial year 54
19 Goodwill impairment Parent Ltd Management believes goodwill has impaired in the previous years by $16,600
20 Parent Ltd Management believes goodwill has further impaired in the current period years by $6,600
21 Intra-group depreciable non-current asset (Plant-Steel-Ball) transaction: Subsidiary sell non current asset to Parent in current period Beginnig of the current year, Subsidiary Ltd sold an item of plant-hard to Parent Ltd for a price of $46,700
22 Cost of the plant-hard at the time of intra-group transaction is $51,700
23 Accumulated depreciation of the plant-hard at the time of intra-group transaction is $26,700
24 Remaining useful life of the plant-hard at the time of sale with no expected residual value, in years 10
25 Intra-group depreciable non-current asset (Plant-Aluminium-Spade) transaction: Parent sell non current asset to Subsidiary in previous period Beginnig of the previous year, Parent Ltd sold an item of plant-happy to Subsidiary Ltd for a price of 46,900
26 Cost of that item of plant-happy at the time of intra-group transaction is $51,900
27 Accumulated depreciation of the plant-happy at the time of intra-group transaction is $26,900
28 Remaining useful life of the plant-happy at the time of sale with no expected residual value, in years 5
29 Income tax rate as % is 30
30 Note The management of Parent Ltd values any non-controlling interest in Subsidiary Ltd at fair value
Marking Criteria
Category Marks
Correctly completing consolidation journal entries 63
Linking each journal item to the adjustment columns on the group financial statements 63
Non controlling inerest at the date of acquisition 4
Non controlling inerest from the date of acquisition to the beginning of the period 10
Non controlling intereest during the current period 14
Summay table completion of non controlling interest 5
Group income statement 12
Group balance sheet 21
Journal reference number in the Group income statement reference columns 30
Journal reference number in the Group balance sheet reference columns 30
Group statemet of changes in equity 8
Total 260
Weighted to 30%
OUTPUT
Detailed reconciliation of opening and closing retained earnings Parent Ltd Subsidiary Ltd Consolidation adjustments Consolidated entity
Ref No Dr Dr Dr Dr Dr Dr Dr Dr Ref No Cr Cr Cr Cr Cr Cr Cr Cr
Sales revenue $480,000 $115,000 $595,000
Cost of goods sold -$100,000 -$40,000 -$140,000
Other expenses -$80,000 -$15,000 -$95,000
Goodwill impairment expense $0
Other revenue $70,000 $25,000 $95,000
Gain on bargain purchase $0
Profit before tax $370,000 $85,000 $455,000
Tax expense -$60,000 -$30,000 -$90,000
Profit for the year $310,000 $55,000 $365,000
Retained earnings—beginning of year $1,000,000 $800,000 $1,800,000
Retained earnings available for distribution $1,310,000 $855,000 $2,165,000
Dividends paid -$160,000 -$30,000 -$190,000
Dividend declared -$40,000 -$10,000 -$50,000
Retained earnings—30 June 2X20 $1,110,000 $815,000 $1,925,000
Statement of financial position Parent Ltd Subsidiary Ltd Consolidation adjustments Consoiidated entity
Shareholders’ equity Ref No Dr Dr Dr Dr Dr Dr Dr Dr Ref No Cr Cr Cr Cr Cr Cr Cr Cr Shareholders’ equity
Revaluation and other reserves $0
Retained earnings $1,110,000 $815,000 $1,925,000
Share capital $4,000,000 $1,500,000 $5,500,000
Current liabilities Current liabilities
Accounts payable $20,000 $30,000 $50,000
Dividends payable $40,000 $10,000 $50,000
Deferred tax liability $0
Non-current liabilities Non-current liabilities
Loans $600,000 $250,000 $850,000
Deferred tax liability 0
Total of liabilities and equity $5,770,000 $2,605,000 $8,375,000.00
Current assets Current assets
Cash $150,000 $25,000 $175,000
Accounts receivable $242,000 $175,000 $417,000
Dividends receivable $8,000 $0 $8,000
Inventory $500,000 $300,000 $800,000
Deferred tax asset 0
Non-current assets Non-current assets
Land $1,400,000 $1,105,000 $2,505,000
Plant $1,870,000 $1,300,000 $3,170,000
Accumulated depreciation -$400,000 -$300,000 -$700,000
Deferred tax asset $0
Goodwill on acquistion $0
Accumulated goodwill impairment $0
Investment in Subsidiary Ltd $2,000,000 $0 $2,000,000
Total assets $5,770,000 $2,605,000 $8,375,000
0.00
Statement of Changes in Equity
Description Share capital $ Retained earnings $ Reserves $ Group $
Balance at 1 July 2019
Total comprehensive income for the year
Dividends
Balance at 30 June 2020
Ref No Dr/Cr Consolidation journal account name
1 Consolidation journal entries for the fair value adjustment of the Plant-Touch U in Subsidiary Ltd and the resulted tax effect Debit $ Credit $
2 Consolidation journal entries relating to pre-tax depreciation entry resulting because of fair value adjustment of the Plant-Touch-U asset Debit $ Credit $
3 Consolidation journal entries relating to tax effect result from the depreciation entry resulting because of fair value adjustment of the Plant-Touch-U to prepare group accounts for the current year Debit $ Credit $
4 Consolidation journal entries for the elimination of Parent Ltd’s investment in Subsidiary Ltd Debit $ Credit $
5 Consolidation journal entries relating to the management fees for the current year Debit $ Credit $
6 Consolidation journal entries relating intra-group inventory-Type High transactions and its tax effects Debit $ Credit $
7 Consolidation journal entries relating intra-group inventory-Type Low transactions and its tax effects Debit $ Credit $
8 Consolidation journal entries relating intra-group inventory (coming from the previous period)-Type Rich transactions and its tax effects Debit $ Credit $
9 Consolidation journal entries relating to impairment of goodwill. Debit $ Credit $
10 Consolidation journal entries relating intra-group plant-Steel-Ball transactions and its tax effects Debit $ Credit $
11 Consolidation journal entries relating intra-group Plant-Aluminium-Spade transactions and its tax effects Debit $ Credit $
12 Consolidation journal entries relating to intra-group dividends. Debit $ Credit $
13 Itemise and show the non-controlling interests in Subsidiary Ltd on acquisition date Credit $
Share capital
Retained earnings
Revaluation surplus
Goodwill
Total 0.00
14 Itemise and show the non-controlling interest movements in share capital and reserves between the acquisition date and beginning of the current financial year Credit $
Increase in retained earnings from acquisition date to beginning of year
Additional depreciation expense due to revaluation of Plant Touch-U
Additional income tax expense due to previous period depreciation expense from revaluation of Plant Touch-U
Previous period intra-group cost of sale of Type-Rich inventory
Previous period intra-group cost of sale of Type-Rich inventory – income tax
Impairment expense of goodwill in previous period
Previous period intra-group gain on sale of Plant Aluminum-Spade
Previous period intra-group gain on sale of Plant Aluminum-Spade – income tax
Additional depreciation expense due to previous period intra-group sale of Plant Aluminum-Spade
Additional income tax expense due to previous period depreciation expense from intra-group sale of Plant Aluminum-Spade
Total 0.00
15 Itemise and show the non-controlling interests of the Parent Ltd Group for the current financial year Credit $
Profit after tax for the year
Depreciation expense from revaluation of Plant Touch-U
Income tax expense from depreciation expense of revaluation of Plant Touch-U
Intra-group cost of sale of Type-Low inventory
Intra-group cost of sale of Type-Low inventory – income tax
Intra-group cost of sale of Type-Rich inventory
Intra-group cost of sale of Type-Rich inventory – income tax
Impairment expense of goodwill
Intra-group gain on sale of Plant Steel-Ball
Intra-group gain on sale of Plant Steel-Ball – income tax
Depreciation expense from intra-group sale of Plant Steel-Ball
Income tax expense from depreciation expense of intra-group sale of Plant Steel-Ball
Depreciation expense from intra-group sale of Plant Aluminum-Spade
Income tax expense from depreciation expense of intra-group sale of Plant Aluminum-Spade
Total 0.00
16 Comppute the total non-controlling interest (NCI Credit $
NCI at acquisition
NCI from acquisition to beginning of year
NCI during the year
Interim dividend
Final dividend
Total NCI in the group 0.00
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