Reference no: EM13832408
INFORMATION
The following matters should be given particular attention:
1. In your assignment use a 12-pt Times New Roman font, use 2 cm margins on all four sides of your page.
2. Evidence of extensive research beyond the prescribed text is required. Ensure these are referenced appropriately. Refer to the statement regarding plagiarism.
3. No extensions will be granted unless supported by appropriate documentation prior to the due date.
4. This assignment must be handed in for successful completion of the course and will count 25 marks towards the final mark.
5. Marks have been allocated to each specific section of your assignment.
6. The assignment is to be conducted in groups of two.
ASSIGNMENT - Part A
Question 1
The financial statements of Orange Ltd and its subsidiary, Plum Ltd, at the 30 June 2015 contained the following information:
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|
Orange Ltd $
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Plum Ltd $
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|
Profit before tax
|
3,200
|
1.800
|
|
Income tax expense
|
1.300
|
240
|
|
Profit for the year
|
1,900
|
1.560
|
|
Retained earnings (1/7/14)
|
1.500
|
2.100
|
|
|
3.400
|
3.660
|
|
Dividend paid
|
500
|
0
|
|
Retained earnings (30/6/15)
|
2.900
|
3.660
|
|
Share capital
|
25.000
|
10000
|
|
General reserve
|
8.000
|
3000
|
|
Other components of equity*
|
1.000
|
500
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Liabilities
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5.000
|
1.300
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|
|
41.900
|
18460
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|
Land
|
8,600
|
5.100
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|
Plant
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17.000
|
8.000
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|
Accumulated depreciation
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(5.000)
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(1.000)
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Financial assets
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3.000
|
2.000
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|
Inventory
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3.000
|
4.000
|
|
Cash
|
300
|
360
|
|
Shares in Plum Ltd
|
15.000
|
|
|
|
41.900
|
18.460
|
* This relates to the available-for-sale assets financial assets. The balance of the accounts at 1/7/14 were $1500 (Orange Ltd) and $300 (Plum Ltd)
Orange Ltd had acquired al the shares capital of Plum Ltd on 1 July 2013 for $15000 when the equity of Plum Ltd consisted of:
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Share capital - 10000 shares
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$10000
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|
General reserve
|
2000
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|
Retained earnings
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1500
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At the acquisition date by Orange Ltd, Plum Ltd.'s non-monetary assets consisted of:
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Carrying amount $
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Fair value $
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|
Land
|
4000
|
6000
|
|
Plant (cost S6000)
|
5500
|
6500
|
|
Inventory
|
3000
|
4000
|
Additional information:
The plant had a further 5-year life.
All the inventory was sold by 30 June 2014.
All valuation adjustments to non-current assets are made on consolidation.
The land was sold in January 2015 for $6000.
The relevant business combination valuation reserves are transferred, on consolidation, to retained earnings.
In September 2013, Plum Ltd transferred $500 from its general reserve, earned before 1 July 2013, to retained earnings.
The tax rate is 30%.
Required
Prepare the following for Orange Ltd:
a. Calculate gain or loss on purchase.
b. Prepare the valuation entries at 1 July 2015.
c. Prepare the consolidation worksheet.
d. Prepare the Consolidated Statement of Comprehensive Income for the financial year ending 30 June 2015.
e. Prepare the Consolidated Statement of Changes in Equity for the financial year ending 30 June 2015.
f. Prepare the Consolidated Statement of Financial Position for the financial year ending 30 June 2015.
Part B
Question 2
Explain how the existence of a bargain purchase affects the pre-acquisition entries, both in the year of acquisition and in subsequent years.
Question 3
Some adjustment entries in the previous period's consolidation worksheet are also made in the current period's worksheet; explain.