Reference no: EM133164074
Question - On 1 July 2019, ABC Pty Ltd acquired all the share capital of Ten Pty Ltd for $750,000. At that date, Ten Pty Ltd's equity consisted of: Share capital $200,000, General Reserve $182,000 and Retained earnings $114,000.
At 1 July 2019, all the identifiable assets and liabilities of Ten Pty Ltd were recorded at fair value. Both companies employ the perpetual inventory system.
Financial information for ABC and Ten Pty Ltd for the year ended 30 June 2020 is presented below:
|
Financial statements
|
ABC Pty Ltd
|
Ten Pty Ltd
|
|
Sales revenue
|
2,392,000
|
1,856,000
|
|
Cost of sales
|
1,776,000
|
1,340,000
|
|
Wages and salaries
|
115,000
|
124,000
|
|
Depreciation
|
10,400
|
9,600
|
|
Other expenses
|
8,000
|
-
|
|
Total expenses
|
1,909,400
|
1,473,600
|
|
|
482,600
|
382,400
|
|
Proceeds from sale of equipment
|
12,000
|
-
|
|
Carrying amount of equipment sold
|
14,000
|
-
|
|
Gain(loss)
|
-2,000
|
-
|
|
Profit before income tax
|
480,600
|
382,400
|
|
Income tax expense
|
192,240
|
176,960
|
|
Profit
|
288,360
|
205,440
|
|
Retained earnings (1/7/2020)
|
201,640
|
80,560
|
|
|
490,000
|
286,000
|
|
Dividend paid
|
100,000
|
-
|
|
Retained earnings (30/6/2021)
|
390,000
|
286,000
|
|
Share capital
|
1,000,000
|
600,000
|
|
General reserve
|
280,000
|
192,000
|
|
Deferred tax liability
|
104,000
|
86,000
|
|
|
1,774,000
|
1,164,000
|
|
Investment in subsidiary Ltd
|
750,000
|
-
|
|
Cash
|
160,000
|
86,000
|
|
Inventory
|
336,000
|
72,000
|
|
Other current assets
|
50,000
|
736,000
|
|
Land
|
200,000
|
240,000
|
|
Equipment
|
104,000
|
56,000
|
|
Accumulated depreciation
|
-20,000
|
-26,000
|
|
|
1,580,000
|
1,164,000
|
Additional information:
1. On 1 January 2020, Ten Pty Ltd sold inventory costing $60,000 to ABC Pty Ltd for $100,000. Half of this inventory was still on hand with ABC Pty Ltd at 30 June 2021.
2. On 31 March 2020, ABC Pty Ltd sold equipment to Ten Pty Ltd for $12,000 which was $2,000 below its carrying amount to ABC Pty Ltd at that date. Ten Pty Ltd charged deprecation at the rate of 10% p.a. on this time.
3. In the 2020 period, ABC Pty Ltd sold a block of land to Ten Pty Ltd at $40,000 above cost. The land is still held by Ten Pty Ltd.
4. There was a profit in the beginning inventory of ABC Pty Ltd of $12,000 on goods acquired from Ten Pty Ltd in the previous period.
5. The tax is 30 per cent.
Required -
1. Calculate goodwill on the date of acquisition;
2. Prepare journal entries for consolidation worksheet;
3. Prepare consolidation worksheet for ABC Pty Ltd for the year ended 30 June 2020.
4. Prepare consolidated financial statements for the year ended 30 June 2020.