Reference no: EM131844687

Question 1: Consolidation worksheet entries

On 1 July 2015, Zack Ltd acquired all the issued shares (ex div.) of William Ltd for $227 500. At this date the equity of William Ltd consisted of:

Share capital	$ 150 000
General reserve	34 000
Retained earnings	20 000

At acquisition date, William Ltd reported a dividend payable of $8000. All the identifiable assets and liabilities of William Ltd were recorded at amounts equal to their fair values except for:

	Carrying amount	Fair value
Plant (cost $200 000)	$175 000	$190 000
Land	150 000	155 000
Inventory	32 000	40 000

The plant was considered to have a further 3-year life. Of the inventory, 90% was sold by
30 June 2016 and the remainder was sold by 30 June 2017. The land was sold in January 2016 for $170 000. William Ltd had recorded goodwill of $2000 (net of accumulated impairment losses of $12 000).William Ltd was involved in a court case that could potentially result in the company paying damages to customers. Zack Ltd calculated the fair value of this liability to be
$8000, even though William Ltd had not recorded any liability.

The following events occurred in the year ending 30 June 2016.
- On 12 August 2015 William Ltd paid the dividend that existed at 1 July 2015.
- On 1 December 2015 William Ltd transferred $17 000 from the general reserve existing at 1 July 2015 to retained earnings.
- On 1 January 2016 William Ltd made a call of 10c per share on its issued shares. William Ltd had 100 000 shares on issue. All call money was received by 31 January 2016.
- On 29 June 2016 William Ltd reassessed the liability in relation to the court case as the chances of winning the case had improved. The fair value was now considered to be $2000.

Required

Prepare the consolidation worksheet entries for the preparation by Zack Ltd of its consolidated financial statements at 30 June 2016.

Question 2: Consolidation worksheet entries

Ron Ltd operates a number of supermarkets with an emphasis on the supply of quality produce. The operations of Sam Ltd are primarily in the fine fruit market. Believing that the acquisition of Sam Ltd would enable Ron Ltd to expand its supply of quality produce to its customers, Ron Ltd commenced actions to acquire the shares of Sam Ltd. On 1 July 2013, Ron Ltd acquired all the issued shares (cum div.) of Sam Ltd for $123 500. At this date the equity of Sam Ltd consisted of:

Share capital	$100 000
Reserves	5 000
Retained earnings	10 000

On 1 July 2013, Sam Ltd had recorded a dividend payable of $6000 and goodwill of $5000 (net of accumulated impairment losses of $7000). The dividend was paid in August 2013. In the previous year's annual report Sam Ltd had reported the existence of a contingent liability for damages based upon a lawsuit by a customer who had slipped on some fallen fruit in one of the stores operated by Sam Ltd. Ron Ltd calculated that this liability had a fair value of $10 000. Sam Ltd also had some customer databases that were not recorded as assets but Ron Ltd placed affair value of $6000 on these items. Sam Ltd believed that the databases had a future life of
4 years.

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

	Carrying amount	Fair value
Plant (cost $120 000)	$94 000	$96 000
Land	80 000	85 000
Inventory	20 000	24 000

The plant had an expected remaining useful life of 10 years. The land was sold by Sam Ltd in February 2015. The inventory was all sold by 30 June 2014.

In February 2016, Sam Ltd transferred $3000 of the reserves on hand at 1 July 2013 to retained earnings. The remaining $2000 was transferred in February 2017.

The court case involving the damages sought by the customer was settled in May 2017. Sam Ltd was required to pay $7500 to the customer.

Required

Prepare the consolidation worksheet entries for the preparation by Sam Ltd of its consolidated financial statements at 30 June 2017.

Question 3: Intragroup transactions

Numbat Ltd owns all of the shares of Goanna Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2016.

Assume an income tax rate of 30%.

(a) On 1 July 2015, Numbat Ltd sold an item of plant costing $15 000 to Goanna Ltd for $18,000. Numbat Ltd had not charged any depreciation on the plant before the sale. Both entities depreciate assets at 10% p.a. on cost.

(b) On 1 January 2014, Goanna Ltd sold a new tractor to Numbat Ltd for $30 000. This had cost Goanna Ltd $24 000 on that day. Both entities charged depreciation at the rate of 10% p.a. on cost.

(c) On 1 July 2015, Numbat Ltd sold an item of machinery to Goanna Ltd for $9000. This item had cost Numbat Ltd $6000. Numbat Ltd regarded this item as inventory whereas Goanna Ltd intended to use it as a non-current asset. Goanna Ltd charges depreciation at the rate of 10% p.a. on cost.

(d) In February 2015, Numbat Ltd sold inventory to Goanna Ltd for $9000, at a mark-up of 20% on cost. One-quarter of this inventory was unsold by Goanna Ltd at 30 June 2015.

(e) Goanna Ltd sold land to Numbat Ltd in December 2015. The land had originally cost Goanna Ltd $20 000, but was sold to Numbat Ltd for only $16 000. To help Numbat Ltd pay for the land, Goanna Ltd gave Numbat Ltd an interest-free loan of $9000, and the balance was paid in cash. Numbat Ltd has as yet made no repayments on the loan.

(f) On 1 July 2014, Goanna Ltd rented a spare warehouse to be used jointly by Numbat Ltd and Galah Ltd with each company paying half the agreed rent to Goanna Ltd. The rent paid to Goanna Ltd in the 2014-15 year was $300 while the rent paid in the 2015-16 year was $350.

Question 4: Consolidation worksheet

On 1 July 2015, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd paid $30 000 in cash and 20 000 shares in Fluffy Ltd valued at $3 per share. At this date, the equity of Glider Ltd consisted of $66 000 share capital and $6000 retained earnings.

At 1 July 2015, all the identifiable assets and liabilities of Glider Ltd were recorded at amounts equal to their fair values except for:

	Carrying amount	Fair value
Plant (cost $150 000)	$120 000	$123 000
Patents	90 000	105 000
Inventory	18 000	22 500

The plant was considered to have a further 5-year life. The patents were sold for $120 000 to an external entity on 18 August 2015. The inventory was all sold by 30 June 2016.

Additional information
(a) Fluffy Ltd sells certain raw materials to Glider Ltd to be used in its manufacturing process. At 1 July 2016, Glider Ltd held inventory sold to it by Fluffy Ltd in the previous year at a profit of $600. During the 2016-17 year, Fluffy Ltd sold inventory to Glider Ltd for $21
000. None of this was on hand at 30 June 2017.

(b) Glider Ltd also sells items of inventory to Fluffy Ltd. During the 2016-17 year, Glider Ltd sold goods to Fluffy Ltd for $4500. At 30 June 2017, inventory which had been sold to Fluffy Ltd at a profit of $300 was still on hand in Fluffy Ltd's inventory.

(c) On 1 July 2016, Glider Ltd sold an item of plant to Fluffy Ltd for $15 000. This plant had a carrying amount in the records of Glider Ltd of $14 000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.

(d) On 1 January 2015, Fluffy Ltd sold an item of inventory to Glider Ltd for $18 000. The inventory had cost Fluffy Ltd $16 000. This item was classified by Glider Ltd as plant. Plant of this type is depreciated by Glider Ltd at 20% p.a.

(e) On 1 March 2017, Glider Ltd sold an item of plant to Fluffy Ltd. Whereas Glider Ltd classified this as plant, Fluffy Ltd classified it as inventory. The sales price was $9000 which included a profit to Glider Ltd of $1500. Fluffy Ltd sold this to another entity on 31 March for $9900.

(f) The tax rate is 30%.

At 30 June 2017, the following financial information was provided by the two companies:

	Fluffy Ltd		Glider Ltd
	Dr	Cr	Dr	Cr
Sales revenue		64 500		78 000
Cost of sales	30 900		46 350
Trading expenses	4 800		9 000
Office expenses	7 950		4 050
Depreciation expenses	1 800		3 900
Proceeds on sale of plant		9 000		15 000
Carrying amount of plant sold	7 500		14 000
Income tax expense	11 100		7 300
Share capital		96 000		66 000
Retained earnings (1/7/16)		48 000		31 500
Current liabilities		21 100		10 500
Deferred tax liability		11 000		15 000
Plant	57 000		107 250
Accumulated depreciation - plant		18 300		33 450
Intangibles	12 000		11 100
Deferred tax assets	8 100		9 450
Shares in Glider Ltd	90 000		0
Inventory	28 500		24 600

Required

Prepare a consolidation worksheet for the preparation of the consolidated financial statements of Fluffy Ltd at 30 June 2017.

Question 5: Consolidation worksheet, consolidated financial statements

On 1 July 2015, Ghost Ltd acquired all the shares of Bat Ltd for $330 000 on an ex-div. basis. On this date, the equity and liabilities of Bat Ltd included the following balances:

Share capital	$     200 000
General reserve	25 000
Retained earnings	45 000
Dividend payable	10 000
Provisions	169 500

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

	Carrying amount	Fair value
Plant and equipment (cost $300 000)	$186 000	$190 000
Trademark	100 000	110 000
Inventory	70 000	80 000
Land	50 000	70 000
Goodwill	25 000	55 000
Machinery (cost $18 000)	15 000	16 000

Goodwill was not impaired in any period. 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. The machinery, which was estimated to have a further 4- year life at acquisition date, was sold on 1 January 2017. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation.

During the year ended 30 June 2016, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2017. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.

Additional information

(a) Of the interim dividend paid by Bat Ltd in the current year, $5000 was from profits before acquisition date. All other dividends were from current year profits. Shareholder approval is not required in relation to dividends.

(b) On 1 July 2016, Bat Ltd has on hand inventory worth $12 000, being transferred from Ghost Ltd in June 2016. The inventory had previously cost Ghost Ltd $8000. On 31 March 2017, Bat Ltd transferred an item of plant with a carrying amount of $10 000 to Ghost Ltd for $15 000. Ghost Ltd treated this item as inventory. The item was still on hand at the end of the year. Bat Ltd applied a 20% depreciation rate to this plant.

(c) On 1 January 2017, Bat Ltd acquired $8000 inventory from Ghost Ltd. This inventory originally cost Ghost Ltd $5000. The profit in inventory on hand at 30 June 2017 was $1000.

(d) During the year ending 30 June 2017, Bat Ltd sold inventory costing $12 000 to Ghost Ltd for $18 000. Two-thirds of this was sold to external parties for $9000.

(e) On 1 January 2016, Ghost Ltd sold furniture to Bat Ltd for $8000. This had originally cost Ghost Ltd $12 000 and had a carrying amount at the time of sale of $7000. Both entities charge depreciation at a rate of 10% p.a.

(f) Ghost Ltd sold some land to Bat Ltd in December 2016. The land had originally cost Ghost Ltd $25 000, but was sold to Bat Ltd for only $20 000. To help Bat Ltd pay for the land, Ghost Ltd gave Bat Ltd an interest-free loan of $12 000. Bat Ltd has as yet made no repayments on the loan.

(g) The tax rate is 30%.

On 30 June 2017 the trial balances of Ghost Ltd and Bat Ltd were as follows:

Debit balances	Ghost Ltd	Bat Ltd
Shares in Bat Ltd	$325 000	-
Cash	7 800	$35 000
Receivables	6 000	20 000
Inventory	20 000	50 000
Deferred tax assets	10 200	-
Machinery	15 000	15 000
Plant and equipment	113 000	300 000
Land	25 000	50 000
Furniture	7 000	8 000
Trademark	-	100 000
Goodwill	-	25 000
Cost of sales	162 000	128 000
Other expenses	53 000	41 000
Income tax expense	20 000	18 000
Interim dividend paid	12 000	10 000
Final dividend declared	6 000	4 000
Loan to Bat Ltd                                                                   12 000                   -
	$794 000	$804 000
Credit balances
Share capital	$312 000	$200 000
General reserve	20 000	25 000
Retained earnings (1/7/16)	30 000	45 000
Final dividend payable	6 000	4 000
Current tax liabilities	8 000	2 500
Provisions	78 000	169 500
Loan from Ghost Ltd	-	12 000
Sales	220 000	182 000
Other income	62 000	20 000
Gains(losses) on sale of non-current assets	22 000	25 000
Accumulated depreciation - plant and	34 000	114 000
equipment
Accumulated depreciation - machinery	1 000	3 000
Accumulated depreciation - furniture	1 000	2 000
	$794 000	$804 000

Required

Prepare the consolidation worksheet for Ghost Ltd for the preparation of consolidated financial statements at 30 June 2017.