Reference no: EM133757527

Corporate Accounting and Reporting

Assessment -

Assessment Type: Short report on Consolidated financial statements and calculations - Individual assessment.

Purpose: This assessment is designed to allow students to research and analyse accounting standards and interpret how they apply to various corporate groups. It enables students to identify and solve problems relating to accounting for consolidated groups. This relates to learning outcomes a, b and c.

Topic: Consolidated financial statements from worksheet with adjustment entries for intragroup transactions: inventories, PPE, dividends, and loan.

Task Details:

On 1 July 2020, Diane Ltd acquired all the shares of Laura Ltd for $330 000. On this date, the equity of Laura Ltd included the following balances:

At acquisition date, all the identifiable assets and liabilities of Laura Ltd were recorded at amounts equal to fair value except for:

The plant and equipment had a further 5-year life at acquisition date and was expected to be used evenly over that time. The trademark was considered to have an indefinite life. During the year ended 30 June 2021, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2022. The machinery, which was estimated to have a further 4-year life at acquisition date, was sold on 1 January 2022. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.

Additional information
Laura Ltd paid an interim dividend of $10 000 in the current year and declared a final dividend of $4000 just before the end of the year. Shareholder approval is not required in relation to dividends.

On 1 July 2021, Laura Ltd has inventories on hand of $12 000 that were transferred from Diane Ltd in June 2021. The inventories had previously cost Diane Ltd $8000.

On 31 March 2022, Laura Ltd transferred an item of plant with a carrying amount of $10 000 to Diane Ltd for $15 000. Diane Ltd treated this as inventories. The item was still on hand at the end of the year. Laura Ltd had applied a 20% depreciation rate to the plant before it was transferred.

On 1 January 2022, Laura Ltd acquired $8000 inventories from Diane Ltd. These inventories originally cost Diane Ltd $5000. One third of these inventories were still on hand at 30 June 2022.

On 1 April 2022, Laura Ltd sold inventories costing $12 000 to Diane Ltd for $18 000. Diane Ltd sold two-thirds of these inventories to external parties for $9000 before the end of the year.

On 1 January 2021, Diane Ltd sold new furniture to Laura Ltd for $8000. Diane Ltd.'s purchase cost was $7000. Both entities charge depreciation at a rate of 20% p.a.

In December 2021, Diane Ltd sold land to Laura Ltd. The land had originally cost Diane Ltd $25 000 but was sold to Laura Ltd for $20 000. Diane Ltd provided Laura Ltd an interest-free loan of $12 000 to assist Laura Ltd to purchase the land. Laura Ltd has made no repayments on the loan to date.

The tax rate is 30%.

On 30 June 2022, the trial balances of Diane Ltd and Laura Ltd were as follows:

Required
Prepare the consolidated financial statements of the Diane Ltd group for 30 June 2022. Show all workings.

Question 1. Calculate acquisition analysis as of 1 July 2020

Question 2. Prepare the consolidation journal entries for 30 June 2022

Question 3. Complete the consolidated worksheet for 30 June 2022

Question 4. Prepare the consolidated financial statements at 30 June 2022

Question 5. Write a report to explain the consolidation process as per AASB10 for wholly owned entities and provide suitable explanations for intragroup adjustments (b) and (c) in additional information above.