Reference no: EM131393944
FINANCIAL AND CORPORATE ACCOUNTING CONSOLIDATION ASSIGNMENT
QUESTION - On 1 July 2013, Flinders Ltd acquired all the share capital of Elizabeth Ltd for $700 000. At that date, Elizabeth Ltd's equity consisted of the following:
Share capital $ 500 000
General reserve 100 000
Retained earnings 50 000
At 1 July 2013, all the identifiable assets and liabilities of Elizabeth Ltd were recorded at fair value.
Financial information for Flinders Ltd and Elizabeth Ltd for the year ended 30 June 2017 is presented in the left-hand columns of the worksheet .It is assumed that both companies use the perpetual inventory system.
Additional information
(a) On January 1 2017, Elizabeth Ltd sold merchandise costing $40 000 to Flinders Ltd for $50 000. Half this merchandise was sold to external entities for $30 000 before 30 June 2017.
(b) It is estimated that goodwill acquired in Elizabeth Ltd has been impaired by an amount of $7 000
(c) Flinders Ltd sells plant to Elizabeth Ltd for $8 500. This plant had an initially cost Flinders Ltd $15 000, is 5 years old and has accumulated depreciation of $8000 at the date of sale. The remaining useful life is assessed as 7 years.
(d) At July 1 2016, there was a profit in the inventory of Flinders Ltd of $4000 on goods acquired from Elizabeth Ltd in the previous period.
(e) The tax rate is 30%.
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Financial statements
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Flinders Ltd
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Elizabeth Ltd
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Adjustments
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Consolidation
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Dr
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Cr
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Sales revenue
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2 000 000
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1 200 000
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Cost of sales
Wages and salaries
Depreciation
Other expenses
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(700 000)
(61 000)
(5 100)
(5 500)
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(710 000)
(35 000)
(4 800)
-
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Total expenses
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(771 600)
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(749 800)
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1 228 400
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450 200
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Profit from sale of plant
Other income
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1 500
30 000
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-
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Legal fees
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(4 200)
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-
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Profit before income tax
Income tax expense
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1 255 700
(376710)
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450 200
(135 060)
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Profit for the year
Retained earnings (1/7/16)
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878 990
70 820
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315 140
60 860
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Dividend paid
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949 810
(123 710)
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376 000
(30 000)
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Retained earnings (30/6/17)
Share capital
General reserve
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826 100
600 000
120 000
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346 000
500 000
100 000
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1 546 100
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946 000
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Other components of equity (1/7/16)
Avail-for-sale fin assets
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10 000
1 000
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7 000
3 000
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Other components of equity (30/6/17)
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11 000
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10 000
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Total equity
Deferred tax liability
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1 557 100
60 000
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956 000
24 000
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Total equity and liabilities
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1 617 100
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980 000
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Shares in Elizabeth Ltd
Cash
Inventory
Other current assets
Avail-for-sale fin assets
Land
Plant and equipment
Accum Depcn & Impair losses
Goodwill
Goodwill- Accum Impair Loss
Deferred Tax Asset
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700 000
200 000
370 000
6 100
41 000
230 000
100 000
(30 000)
-
-
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-
60 000
200 000
250 000
70 000
300 000
110 000
(10 000)
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-
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1 617 100
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980 000
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