Prepare the consolidated accounts for the big company ltd

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Reference no: EM13850974

Q6. The management of one of your clients has told you that they intend not to consolidate the financial statements ofone of their subsidiaries because it is involved in mining, whereas all the other organisations in the group are involved in service industries. How would you respond to this position?

(4 marks)

Q7. New Start Ltd acquired 90 per cent of the share capital of Old Timer Ltd on 1 July2014 for a cost of $500

000. As at the date of acquisition assets of Old Timer Ltd were fairly valued, other than land that had a carrying amount $50 000 less than its fair value. The recorded balances of equity in Old Timer Ltd as at 1 July 2014 were:

 

$

Share capital

350 000

Retained earnings

100 000

 

450 000

Additional information

The management of New Start Ltd values any non-controlling interest at the proportionate share of Old Timer Ltd's identifiable net assets.

Old Timer Ltd had a profit after tax of $70 000 for the year ended 30 June 2015.

During the financial year to 30 June 2015 Old Timer Ltd sold inventory to New Start Ltd for a price of $50 000. The inventory cost Old Timer Ltd $30 000 to produce, and 25 per cent of this inventory was still on hand with New Start Ltd as at 30 June 2015.

During the year Old Timer Ltd paid $10 000 in management fees to New Start Ltd.

On 1 July 2014 Old Timer Ltd sold an item of plant to New Start Ltd for $40 000 when it had a carrying amount of $30 000 (cost of $50 000, accumulated depreciation of $20 000). At the date of sale it was expected that the plant had a remaining useful life of four years, and no residual value.

The tax rate is 30 per cent.

REQUIRED Prepare the consolidation adjustments for the year ended 30 June 2015 and, based on the informationprovided above, calculate the non-controlling interest in the 2015 profits. (10 marks)

Q8.

 

 

 

 

 

2016

2015 ($000)'s

 

 

 

($000)'s

 

 

 

Assets

 

 

 

 

Cash

96

---

 

 

Accounts receivable

36

60

 

 

Allowance for doubtful debts

(12)

(8)

 

 

Property, plant and equipment

156

120

 

 

Accumulated depreciation-property, plant

(36)

(20)

 

 

and equipment

 

 

 

 

Inventory

92

52

 

 

Total assets

332

204

 

 

Liabilities

 

 

 

 

Bank overdraft

--

40

 

 

Accounts payable

60

60

 

 

Accrued wages

20

16

 

 

Provision for annual leave

8

12

 

 

Loans

60

---

 

 

Total liabilities

148

128

 

 

Net assets

184

76

 

 

Represented by:

 

 

 

 

Shareholders' funds

 

 

 

 

Share capital (ordinary shares)

140

20

 

 

Revaluation surplus

28

8

 

 

Retained earnings

16

48

 

 

Total shareholders' funds

184

76

 

 

 

 

 

 

 

The statement of comprehensive income (extract) of Wayne's Pools Ltd for the

 

 

year ended 30 June 2016 is:

 

 

 

 

 

 

2016 ($000)'s

 

 

Revenues

 

 

 

 

Sales

 

60

 

 

Interest (no interest receivable at year end)

 

4

 

 

Profit on sale of property (which had a

 

8

 

 

carrying amount of $20 000)

 

 

 

 

Expenses

 

 

 

 

Cost of goods sold

 

(40)

 

 

Doubtful debts

 

(8)

 

 

Depreciation

 

(20)

 

 

Wages

 

(20)

 

 

Employee entitlements

 

(16)

 

 

Loss for the year

 

(32)

 

 

 

Wayne's Pools Ltd is involved in manufacturing swimming pools. Wayne's Pools Ltd's statement of financial positions for the years ended 30 June 2015 and 30 June 2016 are presented below.

 

REQUIRED Prepare a statement of cash flows for Wayne's Pools Ltd for the year ended 30 June 2016. Comparatives are not required. Ignore tax effects. (18 marks)

 

Q9. The Big Company Ltd acquires 100 per cent of the shares of The Little Company Ltd on 1 July 2014 for aconsideration of $1.25 million. The share capital and reserves of The Little Company Ltd at the date of acquisition are:

Share capital

$750 000

Retained earnings

$375 000

Revaluation surplus

$375 000

 

$1 500 000

 

Additional information

There are no transactions between the entities and all assets are fairly valued at the date of acquisition. No land or plant is acquired or sold by The Little Company Ltd in the year to 30 June 2015. The financial statements of The Big Company Ltd and The Little Company Ltd at 30 June 2015 (one year after acquisition) are:

 

 

 

The Big

 

The Little

 

 

 

Company Ltd

 

Company Ltd

 

 

 

 

($000)

 

 

($000)

 

Reconciliation of opening and closing

 

 

 

 

 

 

retained earnings

 

 

 

 

 

 

Profit before tax

 

750

 

 

375

 

Tax

 

(250)

 

 

(125)

 

Profit after tax

 

500

 

 

250

 

Retained earnings at 30 June 2014

 

1 000

 

 

375

 

Retained earnings at 30 June 2015

 

1 500

 

 

625

 

 

 

 

 

 

 

 

 

The Big

The Little

 

 

 

Company Ltd

Company Ltd

 

 

 

 

($000

($000)

 

Statements of financial position

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Retained earnings

 

1 500

625

 

Share capital

 

3 000

750

 

Revaluation surplus

 

750

500

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

250

250

 

Non-current liabilities

 

 

 

 

 

 

Loans

 

1 500

625

 

 

 

 

7 000

2 750

 

Current assets

 

 

 

 

 

 

Cash

 

250

200

 

Accounts receivable

 

875

300

 

Non-current assets

 

 

 

 

 

 

Land

 

1 750

750

 

Plant

 

2 875

1 500

 

Investment in The Little Company Ltd

 

1 250

---

 

 

 

 

7 000

2 750

REQUIRED

Prepare the consolidated accounts for The Big Company Ltd and The Little Company Ltd as at 30 June 2015. (12marks)

Reference no: EM13850974

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