Reference no: EM132311523

Assignment

Learning outcomes

Upon successful completion of this subject, students should:

• be able to explain the relationships that exist between a parent company and its subsidiary(ies), an investor and its investee, a company and its overseas subsidiaries;

• be able to prepare accounts for each of the above-mentioned business combinations in accordance with relevant professional and statutory reporting requirements;

• be able to discuss the relevant accounting standards and statutory reporting requirements for foreign currency dealings, segment reporting, and leases; and

• be able to critically assess and report upon the information contained within published financial statements.

Assessment item 1

Question 1

Topic 1: Consolidation: Principles and accounting requirements

On 1 July 2017, Positive Ltd acquired all the issued shares of Smart Ltd for $123,000. At the date of acquisition, the shareholder’s equity of Smart Ltd was as follows.

(details and table attached below)

the assets and liabilities of Smart Ltd were recorded at amounts equal to their fair values at e acquisition date, except for some assets detailed below.

(details and table attached below)

Additional information:

1. The inventory was all sold by 30 June 2018.

2. The land was sold on 1 February 2018 for $75,000.

3. The plant was considered to have a further 5-year life. The plant was sold for $77,500 on 1 January 2019.

4. At acquisition date Smart Ltd had recorded a dividend payable of $3,500 and goodwill of $2,500 (net of accumulated impairment losses of $6,500).

5. Smart Ltd had not recorded some internally generated brands that Positive Ltd considered to have a fair value of $6,000. The brand was considered to have an indefinite life.

6. An item not recorded by Smart Ltd was a contingent liability relating to a current court case in which Smart Ltd was involved and a supplier was seeking compensation.

Positive Ltd placed a fair value of $7,500 on this liability. This court case was settled in May 2019 at which time Smart Ltd was required to pay damages of $8,000.

7. In February 2018, Smart Ltd transferred $10,000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $7,500 was transferred in February 2019.

8. Both companies have an equity account entitled ‘Other components of equity’ to which certain gains and losses from financial assets are taken. At 1 July 2018, the balances of these accounts were $15,000 (Positive Ltd) and $7,500 (Smart Ltd).

The financial statements of the two companies at 30 June 2019 contained the following information:

(details and table attached below)

Required:

1. Prepare the acquisition analysis at 1 July 2017.

2. Prepare the consolidation worksheet entries for Positive Ltd’s group at 30 June 2019.

3. Prepare the consolidation worksheet for Positive Ltd’s group at 30 June 2019.

Note: you are not required to prepare the consolidation financial statements.

Question 2

Topic 2: Consolidation: Intra-group transactions

On 1 July 2015, Ping Pong Ltd acquired all the issued shares of Sing Song Ltd. At the date of acquisition, the shareholders’ equity of Sing Song Ltd consisted of share capital $150,000; general reserve $20,000 and retained earnings $10,000. The identifiable net assets of Sing
Song Ltd were recorded at amounts equal to their fair values at the date of acquisition. At 30 June 2019, four years afer acquisition, the accounts of the two companies appear as follows:

(details and table attached below)

Additional information:

1. The directors have decided that goodwill should be written o? completely, no writedowns for goodwill impairment losses were made in prior years.

2. During the current financial year, Sing Song Ltd paid management fees of $7,000 to Ping Pong Ltd.

3. On 1 June 2019, Ping Pong Ltd sold inventory to Sing Song Ltd for $30,000. All of this inventory has been sold by Sing Song Ltd to parties external to the group during June 2018. This intra-group sale was made on credit terms, and $10,000 remains owing to Ping Pong at 30 June 2018.

4. Sing Song Ltd holds half of the unsecured notes issued by Ping Pong Ltd. Interest at a rate of 12% has been paid on these notes during the year.

5. On 25 January 2019, Sing Song Ltd paid an interim dividend of $2,000 to Ping Pong Ltd.

6. Sing Song Ltd declared a final dividend of $3,000 on 20 June 2019. Ping Pong Ltd has recognised this dividend as a receivable at 30 June 2019.

7. The tax rate is 30%.

Required:

1. Prepare an acquisition analysis.

2. Prepare the consolidation worksheet entries necessary to prepare the consolidated financial statements for the year ending 30 June 2019 for the group comprising Ping Pong Ltd and Sing Song Ltd.

Note: you are not required to prepare the consolidation worksheet and the consolidated financial statements

Presentation

Physical presentation of assignments:

All answers must be presented in minimum font size of 11, Arial or Times New Roman font style. If you have prepared your work in excel and copied and pasted your work into word or pdf (see requirements below), you must ensure that all work presented follow this presentation font size and format.

It is essential that presentation of assignments adheres to accepted standards in relation to neatness and layout, as you are practising to present material in a work situation.

You should submit a bibliography (using APA referencing style) with your assignment.

For practical questions:

• All journal entries must include narrations unless otherwise specified and presented in accordance to the format used in your key text;

• Any ledger accounts should preferably be shown in 'T' account format and dates and descriptions are included;

• Journal entries and ledger accounts must reflect the strict order of sequence of events; financial statements (including extracts) should include proper headings and accord with presentation standards.

Assignment 2

Task

You are required to complete all three questions below. A total of 60 marks are allocated to these questions, which will be converted to a final mark out of 20%. All workings, when appropriate, must be shown to substantiate your answers.

Question 1

Topic 3: Consolidation: Non-controlling interests

On 1 July 2016, Peaceful Ltd acquired 80% of the shares of Serene Ltd on an ex div basis for $305,600.

All the identifiable assets and liabilities of Serene Ltd were recorded at amounts equal to their fair values except for:

(details and table attached below)

At 30 June 2016, Serene Ltd had recorded a dividend payable of $10,000. The inventory on hand at 1 July 2016 was all sold by 30 November 2016. The machinery had a further 5-year life, but was sold on 1 April 2019. At acquisition date, Serene Ltd reported a contingent liability of $15,000 that Peaceful Ltd considered to have a fair value of $7,000. This liability was settled in June 2017 for $10,000.

At acquisition date, Serene Ltd had not recorded an asset relating to equipment design as the asset was still in the research phase. Peaceful Ltd placed a fair value on the asset of $12,000, reflecting expected benefits existing at acquisition date. The asset was considered to have a further 10-year life. On 1 January 2018, the asset met the requirements of AASB 138 Intangible Assets and subsequent expenditure by Serene Ltd on the asset was capitalised.

Peaceful Ltd uses the full goodwill method. At 1 July 2016, the fair value of the non-controlling interest was $75,000. On 30 June 2019 the trial balances of Peaceful Ltd and Serene Ltd were as follows

(details and table attached below)

Additional information

1. On 1 July 2017, Serene Ltd sold an item of plant to Peaceful Ltd at a profit before tax of $4,000. Peaceful Ltd depreciates this class of plant at a rate of 10% p.a. on cost while Serene Ltd applies a rate of 20% p.a. on cost.

2. At 30 June 2018, Peaceful Ltd had on hand some items of inventory purchased from Serene Ltd in June 2018 at a profit before tax of $500. These were all sold by 30 June 2019.

3. During the financial year ending 30 June 2019, Peaceful Ltd recorded a sales of inventory to Serene Ltd at $12,000, afer adding a mark-up of 20% on cost. $3,000 of this inventory remains unsold by 30 June 2019.

4. The other components of equity relate to financial assets. These assets are measured at fair value with movements in fair value being recognised in other comprehensive income.

5. The parent and the subsidiary are considered to be separate cash generating units.

Management have analysed the impairment indicators on an annual basis and conducted an impairment test on the subsidiary cash generating unit in the financial year ending 30 June 2018, which resulted in the writing down of goodwill in the records of the subsidiary by $4,000. There have been no other business combinations involving these entities since 1 July 2016.

6. The tax rate is 30%.

7. Extracts from the statement of changes in equity for Serene Ltd were as follows:
(details and table attached below)
Required:

1. Prepare an acquisition analysis.

2. Prepare the consolidation worksheet entries for the year ended 30 June 2019.

Note: you are not required to prepare the consolidation worksheet and the consolidated financial statements.

Question 2

Topic 4: Investment in associates

Abby Ltd acquired 30% of the issued ordinary shares of Binny Ltd for $160,000 on 1 July 2018.

The equity of Binny Ltd at that date was as follows. All assets were recorded at fair value.

Ordinary shares 250,000

Retained earnings 175,000

At 30 June 2019, Abby Ltd had inventories costing $60,000 on hand which had been purchased from Binny Ltd. Binny Ltd had recognised a profit before tax of $25,000 on the sales.

At 30 June 2019, Binny Ltd had inventories costing $20,000 on hand which had been purchased from Abby Ltd. Abby Ltd had recognised a profit before tax of $5,000 on the sales.

For the year ended 30 June 2019, the income and changes in equity of Binny Ltd are as follows:

(details and table attached below)

• Abby Ltd recognises dividends as revenue when they are declared by the investee.

• The tax rate is 30%.

Required:

1. Prepare an acquisition analysis in relation to the acquisition made by Abby Ltd.

2. Prepare the equity journal entries to account for Abby Ltd’s investment in Binny Ltd for the year ended 30 June 2019, assuming that Abby Ltd prepares consolidated financial statements. Show all workings.

Question 3

Topic 5: Accounting for foreign currency transactions

MyBeauty Ltd is an Australian company which specialises in manufacturing and distributing health and beauty products to both local and international clients. The company has a reporting period which ends on 30 June and the Australian dollar is the functional and presentation currency. For the financial year ending 30 June 2019, MyBeauty LTd has entered into two independent transactions denominated in foreign currency as follows.

Transaction A

MyBeauty Ltd sells some goods on credit to Bristol Industries, a British company. The contract, dated 1 January 2019, is denominated in United Kingdom pounds and the contract amounts to £150,000. Bristol Industries settles the contract on 29 January 2019.

The relevant exchange rates are as follows:

3 January 2019 A$1.00 = £0.5684

29 January 2019 A$1.00 = £0.5892

Transaction B

On 1 July 2017, MyBeauty Ltd entered into a loan denominated in Euros, borrowing €300,000 from a European Bank. The following summarises the bank loan statements over the period 1 July 2017 to 30 June 2019.

Required:

In accordance with AASB 121, prepare all relevant journal entries of MyBeauty Ltd to account for the above transactions for the financial years ending 30 June 2018 and 2019, where relevant.

Presentation

Physical presentation of assignments:

All answers must be presented in minimum font size of 11, Arial or Times New Roman font style. If you have prepared your work in excel and copied and pasted your work into word or pdf (see requirements below), you must ensure that all work presented follow this presentation font size and format.

It is essential that presentation of assignments adheres to accepted standards in relation to neatness and layout, as you are practising to present material in a work situation.

For practical questions:

• All journal entries must include narrations unless otherwise specified and presented in accordance to the format used in your key text;

• Any ledger accounts should preferably be shown in 'T' account format and dates and descriptions are included;

• Journal entries and ledger accounts must reflect the strict order of sequence of events; financial statements (including extracts) should include proper headings and accord with presentation standards. Penalties will be imposed if presentation is not of an acceptable standard.

Requirements

You must submit your assignment via Turnitin in Word or PDF file format only. Any submissions in other file types (such as Excel) are not supported by Turnitin, and hence will not be marked.

Assessment item 3

Task

For this assessment, we are using an online system called 'PeerWise' that lets you create and submit multiple choice questions (MCQs), and answer and rate other students' MCQs. Your activities in PeerWise is worth 10% of your overall assessment mark. The first step will be to set up or access your PeerWise account. All students enrolled in the subject by 28 February 2019 will be loaded into the PeerWise course site and ready for students to register/join.

IMPORTANT: If you enrol into the subject afer 28 February 2019, you will need to email your lecturer so that you will be added to the PeerWise course site before you are able to register/ join the course.

If you have not used PeerWise before, just click the "Registration" link and follow the prompts. All you need to do is choose a username and a password for your PeerWise account (to remain anonymous, please do not use username that may identify you such as student ID, emails or first/second names).

If you have used PeerWise before, simply log in and then select "Join course" from the Home menu. To access our course, you will need to enter these information:

1. Course ID = TBA (Your lecturer will confirm your class and advise you the Course ID when session commences)

2. Course name = ACC567 201930 Financial Accounting 2 Class [number] (Your class number will correspond to the Course ID provided to you later)

3. Identifier = your CSU student ID number (Please note, if you have entered your student ID number incorrectly, you will not be awarded marks for this assignment).

During the session, you will need to:

• create 5 questions;

• answer and rate 50 questions; and

• provide constructive feedback on 10 questions.

Please note that you are able to participate more than what is required above. In relation to the assessment criteria, if you exceed the requirement for that component of the assessment (assuming you meet all other criteria set), you will get full marks for that component of the assessment. Make sure you go through the marking criteria in its entirety before you commence any work on PeerWise.

To encourage everyone to participate equally, all activities on PeerWise are anonymous.

However, your lecturer is able to track contributions from each individual. O?ensive comments, feedback or questions will not be tolerated.

More about writing MCQs:

Only questions with "high quality" are rewarded. A high quality question shows evidence of the following features:

• It is succinct and unambiguous to readers;

• It consists of at least 4 choices with one correct answer;

• At least one topic learning outcome (TLO) is selected under "Topics" (note that PeerWise allows you to select up to 5 options);

• The stated TLO(s) selected is/are addressed by the question; and

• The question provides an explanation of the correct answer, including details of the sources that you used to develop the question (e.g. sections of relevant texts, Conceptual Framework, Accounting Standards, any other relevant readings, etc). This explanation will be displayed to your fellow students once they have attempted your question, and it will allow them to further investigate the concepts  covered in the question.

Please note your 5 questions written throughout the session should be related to TLO(s) of 5 di?erent topics.

In writing high quality questions, you should avoid:

• "True or False" types of question (in nature or in substance); or

• Questions that ask for details of an acronym. For example: what does IFRS stand for?

More about rating MCQs:

Please note that when rating a question, you should be judging three things:

• does the question address one or more of the topic learning outcome(s)?

• is the question of high enough quality that it could appear in the final exam?

• is the explanation provided with the question su?icient so that if someone answered the question incorrectly the explanation would help them to understand what they have done wrong?

When making these judgments, consider the following:

• the quality of a question relates to how well it is composed. It should be clear in its intent, that is the question should not be ambiguous. It should be phrased so that it has only one possible answer. The question should directly and clearly relate to a key concept covered in the topic learning outcome(s).

• you should not rate questions di?erently based on their di?iculty – an easy question is just as useful at helping others understand the material as a hard question.

• be fair with your ratings – you MUST justify a poor rating with a comment to the author of the question, or by agreement with a previously written comment. Make sure any comments you provide are constructive – you are rating questions written by your peers so provide the kind of feedback that you would find useful and encouraging yourself.

Assessment item 4

Requirements

This subject has a final examination with a duration of three (3) hours. The exam consists of 20 multiple choice questions and 5 problem questions, in a format similar to that of the sample exam. All questions must be attempted.

Rationale

Subject learning outcomes

This assessment task will assess the following learning outcome/s:

• be able to explain the relationships that exist between a parent company and its subsidiary(ies), an investor and its investee, a company and its overseas subsidiaries.

• be able to prepare accounts for each of the above-mentioned business combinations in accordance with relevant professional and statutory reporting requirements.

• be able to discuss the relevant accounting standards and statutory reporting requirements for foreign currency dealings, segment reporting, and leases.

• be able to critically assess and report upon the information contained within published financial statements.

Attachment:- Accounting Assessment.rar