Produce the completed consolidated financial reports

Assignment Help Financial Accounting

Reference no: EM13972982 , Length: word count:1000

Australian Accounting

QUESTION: House Ltd and Smart Ltd

On 1st December 20X7, House Ltd acquired 70% of the voting shares (ex div) of Smart Ltd for $6,000,000 and obtained the c a pa city to dominate the financial and operating policies of Smart Ltd. At this d ate, the accounts of Smart Ltd included the following balances:

Share capital ($1 ordinary shares)	$3,990,000
General reserve	1,140,000
Retained profits	2,760,000
Dividends payable	319,200

All the identifiable net assets of Smart Ltd were recorded at fair value except for the asset Land, which had a recoded amount of $900,000 below its fair value. Adjustments for the differences between carrying amounts and fair values are made on consolidation.

On the 1st January 20X8, Smart Ltd p aid a further cash dividend of 5% (calculated on the share capital) appropriated from pre-acquisition profits. This amount was recognised as revenue, but the Financial Controller of House Ltd felt that the dividend had impaired the value of the company's investment in Smart Ltd and subsequently records an impairment of the Investment in Smart Account for the amount received as a dividend.

Additional Information for the current year ended 30th June 20X9

(a) On 1st April 20X9, Smart sold inventory to House Ltd for $1,650,000, at a mark- up of 75%. At 30th June 20X9, $950,000 of this inventory was still on hand.

(b) On 5th December 20X7, Smart Ltd sold some inventory to House Ltd for $560,000, at a profit before loss of $200,000. This was still on hand in House Ltd at 30th June 20X8, but was all sold by 30th June 20X9.

(c) On 1st January 20X8, Smart Ltd sold p art of its Motor Vehicle Flee t to House Ltd for $2,500,000 at a before tax profit of $620,000. The Vehicles have a further useful life of 2 years and are depreciated using the straight-line method by both companies.

(d) During the current year, Smart Ltd borrowed funds from House Ltd to undertake the installation of solar panels in several of its buildings so as to reduce the energy consumption of the com p any. House Ltd extended a loan of $2,090,000 to Smart Ltd. This loan was issued on the 1st March 20X9 payable over 5 years, with an interest rate on the loan of 4.5% p a. Interest on the loan is paid on 31st March of every year. Interest has been paid up to 31st March 20X9.

(e) As p art of the loan transaction, Smart Ltd incurred $145,000 charges owing to House Ltd for services performed in helping with a feasibility study for the solar panels. Only $45,000 of this amount has been paid at 30th June 20X9

(f) All dividends are rec ognised before receipt of cash.

(g) It is Group Policy that any Goodwill is impairment tested on an annual basis. It was determined that goodwill was impaired by 20,000 in the year ended 30 June 20X8. However, no impairment of goodwill was estimated for the year ended 30 June 20X9.

(h) The tax rate is 30%.

(i) The companies in the group have financial years from 1st July to 30th June.

The financial statements of House Ltd and Smart Ltd at 30^th June 20X9

Statement of Comprehensive Income (Extract)

	House Ltd	Smart Ltd
Revenues	$83,160,000	$27,562,500
Cost of Sales	$18,295,200	$6,063,750
Operating Expenses	$29,106,000	$9,646,875
Selling Expenses	$12,474,000	$4,134,375
Finance Costs	$1,247,500	$413,500
Other Expenses	$4,158,000	$1,378,125
Profit before Income Tax	$17,879,300	$5,925,875
Interest Income	$837,774	$378,000
Dividend Income	$363,090	$0
Tax Expense	$5,363,790	$1,777,762
Profit after Income Tax	$13,716,374	$4,526,113
Retained Profits as at 1 July 20X8	$2,264,063	$2,917,500
Amount Available for Appropriation	$15,980,437	$7,443,613
Transfer to General Reserve	$1,200,000	$740,000
Dividends Paid	$1,155,000	$119,700
Dividends Provided	$1,443,750	$399,000
Retained Profits as at 30 June 20X9	$12,181,687	$6,184,913

Extract from Statements of Financial Position	House Ltd	Smart Ltd
Assets Cash and Cash Equivalents	$7,455,000	$0
Trade and Other Receivables	$1,587,600	$1,837,500
Other Current Assets	$7,144,200	$4,665,570
Deferred Tax Asset	$1,742,400	$0
Trademarks and Patents	$3,745,190	$6,930,000
Goodwill (net of impairment)	$2,605,000	$0
Plant & Equipment	$9,513,000	$5,628,000
Less Ac cumulated Depreciation (P&E)	-$1,902,600	-$504,000
Motor Vehicles & Fleet Equipment	$5,363,400	$3,643,500
Less Ac cumulated Depreciation (MV)	-$1,609,020	-$1,457,400
Investment in S Ltd	$6,000,000	$0
Less Ac cumulated Impairment	-$139,650
Loans Receivable	$7,000,000	$2,323,000
Buildings	$15,550,000	$0
Land	$5,972,400	$8,610,000
Total Assets	$70,026,920	$31,676,170
Liabilities
Bank Overdraft	$0	$1,955,920
Trade and Other Payables	$9,011,310	$2,998,150
Current Liabilities and Provisions	$8,070,472	$1,816,500
Deferred Tax Liability	$1,719,217	$0
Loans	$5,326,650	$2,090,000
Other non-current Liabilities	$4,088,350	$4,102,350
Total Liabilities	$28,215,999	$12,962,920
*Net Assets*	$41,810,921	$18,713,250
*Shareholders' Equity:*
Share Capital - Ordinary Shares	$11,550,000	$3,990,000
Asset Revaluation Reserve	$6,037,500	$3,600,000
General Reserve	$12,041,734	$4,938,337
Retained Profits	$12,181,687	$6,184,913
Total Shareholders' Equity	$41,810,921	$18,713,250

REQUIRED:

Students are required to consolidate House Ltd and its subsidiary Smart Ltd,

(a) Prepare the consolidation journal entries to consolidate House Ltd and Smart Ltd for the year ended 30th June 20X9. Use Partial Goodwill method to account for goodwill and NCI.

(b) Prepare the consolidated work-sheet showing the consolidation adjustments by setting up a spreadsheet using Excel, or any other similar software package.

Hint: See pages 1086-87 (Figure 21.11) of the text book for an example of a worksheet.

(c) Produce the completed Consolidated Financial Reports (Income Statements and Balance Sheets) for the year ended 30th June 20X9.

Hint: See pages 1088-89 (Figure 21.11) of the text book for an example of consolidated financial statements.

Paper Length: 4 Pages/1000 words

Requirement: To be in excel format

Attachment:- 1086-1090.pdf

Reference no: EM13972982

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