Reference no: EM13843256

Question 1

On 1 July 2014 Kam Ltd acquired all the share capital of Maria Ltd when the equity of Maria Ltd consisted of the following:

100 000 ordinary shares issued at $1 paid to 75c each $75 000

General Reserve 15 000

Retained Earnings 12 000

All identifiable assets and liabilities of both companies were recorded at fair value except:

Carrying Amount Fair Value

Inventory $20 000 $25 000

Machinery (net) 80 000 95 000

The machine has a further 5 year life. Of the inventory on hand at 1 July 2014, 90% was sold by December 2014. At 1" July 2014 Maria Ltd was involved in a court case with an entity that was claiming damages from it. Maria ltd had not raised the liability in relation to expected damages. Kam Ltd measured the fair value of the liability at $5 000. By 31st December 2014 the expectation of winning the court case had improved, so the fair value considered to be $ 1 000.

The tax rate is 30%. Valuation adjustments are made on consolidation. On 1 November 2014 Kam Ltd transferred $6 500 out of Retained Earnings in existence at 1 July 2014 to General Reserve account.

On 1 December 2014, Maria Ltd made a call of 25 c per share; all call money being received by 20th December 2014. At 31 December 2014 the statement of Financial position of Kam Ltd showed shares in Maria Ltd at $147 250.

REQUIRED

Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements for Kam Ltd and its subsidiary Maria Ltd, as at 31 December 2014. Show all workings.

Question 2

Statement of profit or loss and other comprehensive income (classify expenses by function), statement of financial position and statement of changes in equity.

The trial balance of Black Hole Ltd at 30 June 2018 was as follows:

	Debit	Credit
Share       capital                  (ordinary		$ 200 000
share$2, fully paid)		25 000
General reserve		128 400
Retained earnings (1/7/17)		85 000
Revaluation surplus		250 000
Mortgage loan		69 200
Bank overdraft (at call)		80 000
7% debentures		2 800
Interest payable		69 500
Accounts payable		10 000
Dividend payable		52 100
Current tax liability		34 200
Provision       for      employee		18 400
benefits		12 800
Deferred tax liability		42 500
Allowance       for       doubtful		10 000
debts	$ 500
Accumulated      depreciation	58 000
- plant & Equip	87 700
Accumulated impairment - goodwill	7 000
Cash
Accounts receivable
Inventory
Prepaid insurance
Plant and equipment	222 500
Land	220 000
Buildings	380 000
Goodwill	105 000
Deferred tax asset	9 800
Sales revenue		825 000
Cost of sales	450 000
Administrative expenses	265 000
Other expenses	10 000
Interest revenue		2 500
Dividends revenue		3 500
Income tax expense	50 400
Dividends paid	20 000
Dividends declared	10 000
Transfer to general reserve	25 000
	$1 920 90	$1 920 900
	0

Additional information

(a) Administrative expenses for the year include interest expense of $28 700.

(b) All assets are carried at cost, except for land and buildings which are carried at valuation.

(c) During the year, 50 000 shares were issued at an issue price of $2 each, payable in full on application.

(d) On 30 June 2018, the directors revalued land and buildings. The revaluation was based on an independent valuation received from FJ Holden, Registered Valuer. The valuation was based on fair values. The carrying amounts of land and buildings before the revaluation were $195 000 and $350 000 respectively.

(e) The mortgage loan is repayable in annual instalments of $50 000 due on 1 March each year.

(f) The 7% debentures are to be redeemed on 31 March 2019. There is no plan to refinance these debentures in the future.

(g) The provision for employee benefits consists of:

Annual leave $18 000

Long-service leave 16 200

(h) No employee is eligible for long-service leave until 2022.

(i) The company tax rate is 30%.

Required

A. Prepare a statement of profit or loss and other comprehensive income for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101 (classify expenses by function).

B. Prepare a statement of financial position for Black Hole Ltd as at 30 June 2018 to comply with AASB 101.

C. Prepare a statement of changes in equity for Black Hole Ltd for the year ended 30 June 2018, according to the requirements of AASB 101.

[Comparative information must be disclosed in respect of the preceding period for all amounts reported in the current period's financial statements in accordance with AASB 101 paragraph 38. However this information is not provided in the question].