Reference no: EM13343635

Question Detail:

The following financial statements of William Ltd and its subsidiary Adam Ltd have been extracted from their financial records at 30 June 2012.

William Ltd		Adam Ltd
$	$	$	$
Extract from Statements of Comprehensive Income and Changes in Equity
Sales Revenue	1,114,524	896,400
Cost of Sales	(770,240)	(395,080)
Gross Profit	344,284	501,320
Other Revenue
Dividends received from Adam	154,380	-
Management fee revenue	43,990	-
Gain on sale of equipment	66,400	58,100
Expenses
General expenses	(51,128)	(64,242)
Selling expenses	(167,826)	(119,520)
Depreciation	(48,970)	(94,288)
Management fee expense	-	(43,990)
Total expenses	(267,924)	(322,040)
Profit before tax	341,130	237,380
Income tax expense	(102,090)	(70,052)
Profit for the period	239,040	167,328
Retained earnings 30 June 2011	530,204	397,072
769,244	564,400
Dividends paid	(228,084)	(154,380)
Retained earnings 30 June 2012	541,160	410,020
Statements of Financial Position
Current assets
Cash	20,000	30,000
Accounts receivable	78,604	73,418
Inventory	152,720	48,140
Non-current assets
Investment in Adam Ltd	590,960	-
Land	371,840	541,160
Equipment (cost)	497,751	590,628
Accumulated depreciation	(142,345)	355,406	(230,408)	360,220
Total Assets	1,569,530	1,052,938
Current liabilities
Accounts payable	90,802	76,858
Short-term loan payable	68,558	41,500
Non-current liabilities
Long-term debt	288,010	192,560
Shareholders' equity
Share capital	581,000	332,000
Retained earnings	541,160	410,020
Total Liabilities & Equity	1,569,530	1,052,938

Other information:

William Ltd acquired the 100 per cent interest in Adam Ltd on 1 July 2007, that is five (5) years earlier.At that time the capital and retained earnings of Adam Ltd were:

Share capital $332,000 Retained earnings$298,800 $630,800

At the date of acquisition all assets were valued at their fair value.

• During the year William Ltd made total sales to Adam Ltd of $99,600, and Adam Ltd sold $83,000 of inventory to William Ltd.
• The opening inventory in William Ltd as at 1 July 2011 included inventory acquired from Adam Ltd for $66,400 that had cost Adam Ltd $49,800.
• The closing inventory of William Ltd includes inventory acquired from Adam Ltd at a cost of $54,780.This inventory had cost Adam $46,480.
• The closing inventory of Adam Ltd includes inventory acquired from William Ltd at a cost of $19,920.This inventory had cost William Ltd $16,600.
• On 1 July 2011 Adam Ltd sold an item of equipment to William Ltd for $192,560 when its carrying value in Adam Ltd's books was $134,460 (cost $224,100, accumulated depreciation $89,640).This equipment is assessed as having a remaining useful life of six (6) years.
• Adam Ltd paid $43,990 in management fees to William Ltd.
• The tax rate is 30 per cent.

Prepare the journal entries necessary for the preparation of consolidated financial statements

2. Prepare a consolidated statement of financial position as at 30 June 2012 and a consolidated statement of comprehensive income and a consolidated statement of changes in equity for the period ended 30 June 2012 for William Ltd and its subsidiaries.