Advanced Financial Accounting Assignment-
1. Horopito Limited acquired 80% of Sierra Limited on 1 April 2011. All of the assets of Sierra were considered to be fairly valued and the contributed capital and retained earnings of Sierra Limited at the date of acquisition were:
Contributed capital $1,960,000
Retained earnings $710,000
$2,670,000
2. Horopito Limited measures any non-controlling interest at fair value.
3. Horopito Limited acquired 25% of Andorra Limited on 1 April 2014 for $415,500. All of Andorra's assets, except buildings, were considered to be fairly valued at the date of acquisition. The buildings, with a carrying amount of $730,000, had a fair value of $910,000. The buildings have not been revalued in Andorra Limited's records and are expected to have a useful life of twenty five years from 1 April, 2014.
The contributed capital and reserves of Andorra Limited at the date of acquisition were:
Contributed capital $800,000
Revaluation reserve $260,000
Retained earnings $230,000
$1,290,000
4. The financial statements of Horopito Limited and Sierra Limited are presented on pages 5 and 6.
5. For the financial year ended 31 March, 2015, Andorra Limited earned a profit of $84,000 after tax. On the 31 of March, 2015, it declared a dividend of $18,000 and revalued some of its non-depreciable non-current assets downwards by $70,000.
6. For the financial year ended 31 March, 2016, Andorra Limited incurred a net loss of $29,000. The company declared a dividend of $15,000, on 31 March, 2016. Andorra Limited revalued its buildings to $960,000 on 31 March, 2016.
7. Horopito Limited recognises dividends when the investee declares a dividend.
8. The transfer pricing charged for intragroup transactions is as follows:
- Horopito Limited applies a mark-up of 20% to the cost of inventory.
- Sierra Limited applies a mark-up of 25% mark-up to the cost of inventory.
- Andorra Limited applies a mark-up of 33 1/3% to the cost of inventory.
- The Interest rate for intragroup long-term borrowing is 9% per annum.
- As at 31 March, 2014, Sierra Limited still had $24,600 of inventory received from Horopito Limited in its inventory on hand.
9. For the year ended 31 March, 2015:
- Horopito Limited sold $180,000 of inventory to Sierra Limited;
- Sierra Limited sold $450,000 of inventory to Horopito Limited; and
- Andorra Limited sold $240,000 of inventory to Sierra Limited.
- As at 31 March, 2015, Horopito Limited still had $236,250 of the inventory received from Sierra Limited.
- As at 31 March, 2015, Sierra Limited still had $44,000 of the inventory received from Andorra Limited and $168,750 of the inventory received from Horopito Limited in its inventory on hand.
10. For the year ended 31 March, 2016:
- Sierra Limited sold $787,500 of inventory to Horopito Limited; and
- Andorra Limited sold $450,000 of inventory to Sierra Limited.
- As at 31 March, 2016, Horopito Limited still had $135,000 of the inventory received from Sierra Limited.
- As at 31 March, 2016, Sierra Limited still had $175,500 of the inventory received from Andorra Limited and $53,000 of the inventory received from Horopito Limited in its inventory on hand.
11. Impairment testing of goodwill reveals the following information:
|
Description
|
Recoverable amount as at 1 April, 2014
|
Recoverable amount as at 31 March, 2015
|
Recoverable amount as at 31 March, 2016
|
|
Goodwill on acquisition of 80% of Sierra Limited's net assets
|
$171,000
|
$160,000
|
$142,000
|
|
Goodwill on acquisition of 25% of Andorra Limited's net assets
|
$72,000
|
$65,000
|
$61,000
|
12. On 1 April, 2013 Sierra Limited sold an item of plant to Horopito Limited for $186,000. Sierra Limited had purchased this item on 1 April, 2012 for $280,000 and determined that it had an estimated useful life of 8 years. Both companies use the straight-line method of depreciation. Upon sale of the plant, Horopito Limited determined the remaining useful life of the asset to be 4 years. There will be no residual value recoverable at the end of the useful life of the plant.
13. Horopito Limited provides administrative services to Sierra Limited. The annual administration fee was $50,400 for the financial year ending 31 March, 2015 and $51,912 for the financial year ending 31 March, 2016.
You are required to:
Prepare the consolidation journal entries necessary to prepare the consolidated financial statements for Horopito Limited, its subsidiary and associated company at:
- 31 March, 2015 and
- 31 March, 2016.
All relevant accounting standards should be complied with. Narrations are not required for journal entries.
Round all calculations to one (1) dollar.
The tax rate is 28%.
Attachment:- Assignment.rar