Questionusing the information below and on the next two

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Reference no: EM13376203

QUESTION

Using the information below and on the next two pages, prepare the following as at 30th June 2014:

PART A: Adjustment/elimination journal entries for consolidation at that date; and

PART B: Detailed calculation of non-controlling interest balance and consolidation worksheet; and

PART C: Consolidated financial statements and statements of changes in equity for the group and parent.

INFORMATION

For the year ended 30 June 2012:

1. On 1 July 2011 Harbour Ltd created a group entity when it purchased 80% of the issued capital of Bridge Ltd for $440,000 cash. On acquisition Bridge Ltd's accounts showed: Share capital $300,000 and Retained earnings $125,000. All assets and liabilities appearing in Bridge Ltd's financial statements were fairly valued, except:

  • An item of Bridge Ltd's plant, that had originally cost $157,000 and had a carrying value of $100,480, was undervalued by $30,000. The plant was still on hand at 30 June 2014.
  • Bridge Ltd had an internally developed identifiable intangible asset, a patent, with a fair value of $35,000.

During the year Bridge Ltd made sales of inventory to Harbour Ltd of $70,200. Harbour Ltd's closing inventories on 30 June 2012 included $33,600 bought from Bridge Ltd (which included the intragroup mark-up on original cost price).

For the year ended 30 June 2013:

2. On 1 January 2013 it was decided that goodwill acquired in Bridge Ltd should be marked down at a rate of 10% per annum from this date forward (% based on the original value you calculated at acquisition).

3. Also on 1 January 2013 Harbour Ltd sold plant to Bridge Ltd for $35,000. This was financed by a short-term interest-free loan from Harbour Ltd. The plant had originally cost $82,000 when purchased on 1 January 2010.

Harbour Ltd declared and paid dividends of $50,000 for the year. Bridge Ltd did not declare or pay any dividends for the year.

For the year ended 30 June 2014:

4. During the year Bridge Ltd made sales of inventory to Harbour Ltd of $88,100.

5. Harbour Ltd's inventories included the following amounts bought from Bridge Ltd (which included the intragroup mark-up on original cost price): Closing inventory on 30 June 2014 was $13,300; and Opening inventory on 1 July 2013 was $9,100.

6. Harbour Ltd charged management fees to Bridge Ltd.

7. Dividends were declared/paid by both companies.

8. Non-controlling interests to be recognized.

ADDITIONAL INFORMATION:

  • The company tax rate is currently 30% and it has been this rate for many years.
  • Harbour has the following accounting policies for the group:

(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of  any subsidiary;

(ii) Non-controlling interests are measured at the proportionate share of a subsidiary's identifiable net assets;

(iii) Intragroup sales of inventory to be at a markup of 40% on cost;

(iv) Plant is depreciated using the diminishing value method at a rate of 20% p.a. (also known as the    declining-balance or diminishing-balance method); and

(v) All calculated amounts to be rounded to the nearest whole dollar.

AT 30 JUNE 2014

HARBOUR LTD

BRIDGE LTD

 

$

$

INCOME STATEMENTS


 

Sales revenue

1,413,500

978,300

Cost of goods sold

798,000

508,300

Gross profit

615,500

470,000

Other income


 

Management fee revenue

22,600

-

Dividend revenue

69,800

-

Expenses


 

Depreciation expense

(126,200)

(49,000)

Management fee expense

 -

(22,600)

Other expenses

(326,100)

(263,800)

Profit before tax

255,600

134,600

Income tax expense

(76,680)

(40,380)

Profit for the year after tax

178,920

94,220

Retained earnings at start of year

59,120

134,320

Dividend paid/declared

(150,000)

(86,000)

Retained earnings at year end

88,040

142,540

 


 

BALANCE SHEETS


 

Equity


 

Share capital

850,000

300,000

Retained earnings

88,040

142,540

Current Liabilities


 

Accounts payable

191,960

115,860

Income tax payable

95,900

66,700

Dividends payable

75,000

50,000

Non-Current Liabilities


 

Loans

950,000

565,100

Provision for employee benefits

21,900

19,400

Deferred tax liability

6,900

 -

 

2,279,700

1,259,600

Current Assets


 

Accounts receivable

276,300

104,100

Allowance for doubtful debts

(15,500)

(7,000)

Dividends receivable

40,500

-

Inventory

112,100

144,200

Non-Current Assets


 

Land and buildings

800,000

610,800

Plant - at cost

901,200

601,200

Accumulated depreciation - plant

(294,900)

(194,400)

Deferred tax asset

 -

700

Shares in Opera House Ltd

20,000

-

Investment in Bridge Ltd

440,000

 -

 

2,279,700

1,259,600

Reference no: EM13376203

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