Reference no: EM131241557

Assignment Question -

Besar Ltd acquired all of the shares in Kecil Ltd on 1 July 2015. At that date, equity of Kecil Ltd consisted of:

Share Capital	$2 000 000
Retained earnings	800 000

At 1 July 2015, all the assets and liabilities of Kecil Ltd were recorded at amounts equal to fair value except for the following:

	Carrying amount	Fair value
Inventory	$120 000	$150 000
Land	500 000	520 000
Plant (cost $300,000)	180 000	200 000

Inventory was sold in January 2016. The remaining useful life of the plant at date of acquisition is 5 years.

During the period 1 July 2015 and 30 June 2017, the following intragroup transactions have occurred:

1. For the year ending 30 June 2017, Besar Ltd made total sales to Kecil Ltd of $100,000, while Kecil sold $45,000 worth of inventory to Besar Ltd.

2. On 1 January 2016, Kecil Ltd sold an item of plant to Besar Ltd at $80,000. Kecil Ltd recorded gain on sale of plant of $10,000. The plant is assessed as having a remaining useful life of four years.

3. Ending inventory in Besar Ltd at 30 June 2017 consists of inventory acquired from Kecil Ltd at a cost of $15,000. This cost Kecil Ltd $13,000 to produce.

4. On 1 July 2016, Besar Ltd provided a $100,000 loan to Kecil Ltd. The interest rate on this loan is 10% and interest is paid semi-annually on 1 January and 1 July each year. No principal repayment has been made.

The following financial statements of Besar Ltd and its subsidiary, Kecil Ltd have been extracted from their financial records at 30 June 2017.

Statement of Financial Performance

	Besar Ltd	Kecil Ltd
Sales revenue	326 000	168 000
Costs of goods sold	148 000	30 000
Gross profit	178 000	138 000
Dividends revenue	50 000	-
Management fees revenue	2 000	-
Gain on sale of plant	8 000	-
Interest revenue	15 000
Expenses:
Administrative expenses	12 000	1 000
Depreciation	25 000	5 000
Rental expenses	9 000	3 000
Interest expenses	10 000	10 000
Profit before tax	197 000	119 000
Income tax expense	45 000	22 000
Profit for the year	152 000	97 000
Dividends paid	18 000	8 000
Dividends declared	15 000	12 000
Retained earnings 1 July 2016	5 555 000	923 000

Statement of Financial Position

	Besar Ltd	Kecil Ltd
Current assets
Cash	230 000	210 000
Accounts receivable	150 000	120 000
Inventory	490 000	500 000
Dividend receivable	50 000
Interest receivable	20 000
Non-current assets
Deferred tax assets	20 000
Loans receivable	100 000	-
Land	5 000 000	1 200 000
Plant	12 000 000	2 000 000
(-) Accumulated depreciation	(4 500 000)	(800 000)
Investment in Kecil Ltd	3 000 000	-
TOTAL ASSETS	16 560 000	3 230 000
Current liabilities
Accounts payable	153 000	26 000
Provision for warranty	56 000	25 000
Current tax liability	25 000	7 000
Dividend payable	15 000	12 000
Interest payable	25 000	10 000
Non-current liabilities
Deferred tax liability	20 000	15 000
Loans payable	1 000 000	135 000
Preferred shares	2 200 000	-
Notes payable	1 200 000	-
Equity
Retained earnings	5 674 000	1 000 000
Share Capital	6 192 000	2 000 000
TOTAL LIABILITIES AND EQUITY	16 560 000	3 230 000

Required:

1. Prepare consolidated worksheet entries for the preparation of the consolidated financial statements of Besar Ltd at 30 June 2017. Besar Ltd applies the partial goodwill method. (Hint: Provide clear references to each entry for easy identification in the worksheet. Marks will be deducted if no reference is made).

2. Prepare consolidation worksheet for Besar Ltd for the preparation of the consolidated financial statements of Besar Ltd at 30 June 2017. (Hint: Provide clear references to each entry for easy identification in the worksheet. Marks will be deducted if no reference is made).

3. Prepare the consolidated financial statements of Besar Ltd for the year ended 30 June 2017 in accordance to AASB 101 Presentation of Financial Statements. (Hint: expenses are classified according to function (Para 103 AASB 101). All categories of revenue as referred to in Para 35(b) AASB 118 are considered insignificant and shall not be disclosed. Notes to the accounts are not required).