Reference no: EM13850974

Q6. The management of one of your clients has told you that they intend not to consolidate the financial statements ofone of their subsidiaries because it is involved in mining, whereas all the other organisations in the group are involved in service industries. How would you respond to this position?

(4 marks)

Q7. New Start Ltd acquired 90 per cent of the share capital of Old Timer Ltd on 1 July2014 for a cost of $500

000. As at the date of acquisition assets of Old Timer Ltd were fairly valued, other than land that had a carrying amount $50 000 less than its fair value. The recorded balances of equity in Old Timer Ltd as at 1 July 2014 were:

	$
Share capital	350 000
Retained earnings	100 000
	450 000

Additional information

The management of New Start Ltd values any non-controlling interest at the proportionate share of Old Timer Ltd's identifiable net assets.

Old Timer Ltd had a profit after tax of $70 000 for the year ended 30 June 2015.

During the financial year to 30 June 2015 Old Timer Ltd sold inventory to New Start Ltd for a price of $50 000. The inventory cost Old Timer Ltd $30 000 to produce, and 25 per cent of this inventory was still on hand with New Start Ltd as at 30 June 2015.

During the year Old Timer Ltd paid $10 000 in management fees to New Start Ltd.

On 1 July 2014 Old Timer Ltd sold an item of plant to New Start Ltd for $40 000 when it had a carrying amount of $30 000 (cost of $50 000, accumulated depreciation of $20 000). At the date of sale it was expected that the plant had a remaining useful life of four years, and no residual value.

The tax rate is 30 per cent.

REQUIRED Prepare the consolidation adjustments for the year ended 30 June 2015 and, based on the informationprovided above, calculate the non-controlling interest in the 2015 profits. (10 marks)

Q8.
		2016	2015 ($000)'s
		($000)'s
	Assets
	Cash	96	---
	Accounts receivable	36	60
	Allowance for doubtful debts	(12)	(8)
	Property, plant and equipment	156	120
	Accumulated depreciation-property, plant	(36)	(20)
	and equipment
	Inventory	92	52
	Total assets	332	204
	Liabilities
	Bank overdraft	--	40
	Accounts payable	60	60
	Accrued wages	20	16
	Provision for annual leave	8	12
	Loans	60	---
	Total liabilities	148	128
	Net assets	184	76
	Represented by:
	Shareholders' funds
	Share capital (ordinary shares)	140	20
	Revaluation surplus	28	8
	Retained earnings	16	48
	Total shareholders' funds	184	76
	The statement of comprehensive income (extract) of Wayne's Pools Ltd for the
	year ended 30 June 2016 is:
			2016 ($000)'s
	Revenues
	Sales		60
	Interest (no interest receivable at year end)		4
	Profit on sale of property (which had a		8
	carrying amount of $20 000)
	Expenses
	Cost of goods sold		(40)
	Doubtful debts		(8)
	Depreciation		(20)
	Wages		(20)
	Employee entitlements		(16)
	Loss for the year		(32)

 

 

Wayne's Pools Ltd is involved in manufacturing swimming pools. Wayne's Pools Ltd's statement of financial positions for the years ended 30 June 2015 and 30 June 2016 are presented below.

 

REQUIRED Prepare a statement of cash flows for Wayne's Pools Ltd for the year ended 30 June 2016. Comparatives are not required. Ignore tax effects. (18 marks)

 

Q9. The Big Company Ltd acquires 100 per cent of the shares of The Little Company Ltd on 1 July 2014 for aconsideration of $1.25 million. The share capital and reserves of The Little Company Ltd at the date of acquisition are:

Share capital	$750 000
Retained earnings	$375 000
Revaluation surplus	$375 000
	$1 500 000

 

Additional information

There are no transactions between the entities and all assets are fairly valued at the date of acquisition. No land or plant is acquired or sold by The Little Company Ltd in the year to 30 June 2015. The financial statements of The Big Company Ltd and The Little Company Ltd at 30 June 2015 (one year after acquisition) are:

			The Big		The Little
		Company Ltd			Company Ltd
			($000)			($000)
Reconciliation of opening and closing
retained earnings
Profit before tax			750			375
Tax			(250)			(125)
Profit after tax			500			250
Retained earnings at 30 June 2014			1 000			375
Retained earnings at 30 June 2015			1 500			625
			The Big			The Little
			Company Ltd			Company Ltd
				($000		($000)
	Statements of financial position
	Shareholders' equity
	Retained earnings			1 500		625
	Share capital			3 000		750
	Revaluation surplus			750		500
	Current liabilities
	Accounts payable			250		250
	Non-current liabilities
	Loans			1 500		625
				7 000		2 750
	Current assets
	Cash			250		200
	Accounts receivable			875		300
	Non-current assets
	Land			1 750		750
	Plant			2 875		1 500
	Investment in The Little Company Ltd			1 250		---
				7 000		2 750

REQUIRED

Prepare the consolidated accounts for The Big Company Ltd and The Little Company Ltd as at 30 June 2015. (12marks)