PART A: Adjustment/elimination journal entries for consolidation at that date; and
PART B:Detailed calculation of non-controlling interest balance and consolidation worksheet; and
PART C:Consolidated financial statements and statements of changes in equity for the group and parent.
INFORMATION
For the year ended 30 June 2012:
1. On 1 July 2011 Harbour Ltd created a group entity when it purchased 80% of the issued capital of Bridge Ltd for $440,000 cash. On acquisition Bridge Ltd's accounts showed: Share capital $300,000 and Retained earnings $125,000. All assets and liabilities appearing in Bridge Ltd's financial statements were fairly valued, except:
- An item of Bridge Ltd's plant, that had originally cost $157,000 and had a carrying value of $100,480, was undervalued by $30,000. The plant was still on hand at 30 June 2014.
- Bridge Ltd had an internally developed identifiable intangible asset, a patent, with a fair value of $35,000.
During the year Bridge Ltd made sales of inventory to Harbour Ltd of $70,200. Harbour Ltd's closing inventories on 30 June 2012 included $33,600 bought from Bridge Ltd (which included the intragroup mark-up on original cost price).
For the year ended 30 June 2013:
2. On 1 January 2013 it was decided that goodwill acquired in Bridge Ltd should be marked down at a rate of 10% per annum from this date forward (% based on the original value you calculated at acquisition).
3. Also on 1 January 2013 Harbour Ltd sold plant to Bridge Ltd for $35,000. This was financed by a short-term interest-free loan from Harbour Ltd. The plant had originally cost $82,000 when purchased on 1 January 2010.
Harbour Ltd declared and paid dividends of $50,000 for the year. Bridge Ltd did not declare or pay any dividends for the year.
For the year ended 30 June 2014:
4. During the year Bridge Ltd made sales of inventory to Harbour Ltd of $88,100.
5. Harbour Ltd'sinventories included the following amounts bought from Bridge Ltd (which included the intragroup mark-up on original cost price): Closing inventory on 30 June 2014 was $13,300; and Opening inventory on 1 July 2013 was $9,100.
6. Harbour Ltd charged management fees to Bridge Ltd.
7. Dividends were declared/paid by both companies.
8. Non-controlling interests to be recognized.
ADDITIONAL INFORMATION:
- The company tax rate is currently 30% and it has been this rate for many years.
- Harbour has the following accounting policies for the group:
(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books ofany subsidiary;
(ii) Non-controlling interests are measured at the proportionate share of a subsidiary's identifiable net assets;
(iii) Intragroup sales of inventory to be at a markup of 40% on cost;
(iv) Plant is depreciated using the diminishing value method at a rate of 20% p.a. (also known as thedeclining-balance or diminishing-balance method); and
(v) All calculated amounts to be rounded to the nearest whole dollar.
|
AT 30 JUNE 2014
|
HARBOUR LTD
|
BRIDGE LTD
|
|
$
|
$
|
|
INCOME STATEMENTS
|
|
|
|
Sales revenue
|
1,413,500
|
978,300
|
|
Cost of goods sold
|
798,000
|
508,300
|
|
Gross profit
|
615,500
|
470,000
|
|
Other income
|
|
|
|
Management fee revenue
|
22,600
|
-
|
|
Dividend revenue
|
69,800
|
-
|
|
Expenses
|
|
|
|
Depreciation expense
|
(126,200)
|
(49,000)
|
|
Management fee expense
|
-
|
(22,600)
|
|
Other expenses
|
(326,100)
|
(263,800)
|
|
Profit before tax
|
255,600
|
134,600
|
|
Income tax expense
|
(76,680)
|
(40,380)
|
|
Profit for the year after tax
|
178,920
|
94,220
|
|
Retained earnings at start of year
|
59,120
|
134,320
|
|
Dividend paid/declared
|
(150,000)
|
(86,000)
|
|
Retained earnings at year end
|
88,040
|
142,540
|
|
|
|
|
|
BALANCE SHEETS
|
|
|
|
Equity
|
|
|
|
Share capital
|
850,000
|
300,000
|
|
Retained earnings
|
88,040
|
142,540
|
|
Current Liabilities
|
|
|
|
Accounts payable
|
191,960
|
115,860
|
|
Income tax payable
|
95,900
|
66,700
|
|
Dividends payable
|
75,000
|
50,000
|
|
Non-Current Liabilities
|
|
|
|
Loans
|
950,000
|
565,100
|
|
Provision for employee benefits
|
21,900
|
19,400
|
|
Deferred tax liability
|
6,900
|
-
|
|
|
2,279,700
|
1,259,600
|
|
Current Assets
|
|
|
|
Accounts receivable
|
276,300
|
104,100
|
|
Allowance for doubtful debts
|
(15,500)
|
(7,000)
|
|
Dividends receivable
|
40,500
|
-
|
|
Inventory
|
112,100
|
144,200
|
|
Non-Current Assets
|
|
|
|
Land and buildings
|
800,000
|
610,800
|
|
Plant - at cost
|
901,200
|
601,200
|
|
Accumulated depreciation - plant
|
(294,900)
|
(194,400)
|
|
Deferred tax asset
|
-
|
700
|
|
Shares in Opera House Ltd
|
20,000
|
-
|
|
Investment in Bridge Ltd
|
440,000
|
-
|
|
|
2,279,700
|
1,259,600
|