ACCT2201 GROUP CASE STUDY

On 1 July 2013 Tom Limited acquired all of the share capital of Harry Limited for a consideration of $500,000 cash.

At that date all the identifiable assets and liabilities were recorded at fair value with the exception of:

ASSET

Inventory Land Plant (less depn)

Acounts Receivable

Book Value

12,000 25,000 45,000 (17,000) 28,000 21,000

Market Value

13,000 30,000

35,000 19,000

The inventory was all sold by 30/6/14. The remaining useful life of the plant is 7 years. The accounts receivable were collected by 30/6/14 for $19,000 The land was sold on 30/12/16 for $32,000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Harry Ltd consisted of:

Information from the trial balances of Tom Ltd and Harry Ltd at 30 June 2017 is presented overleaf.

Additional Information

1. On 1 Jan 2017 Harry Ltd sold inventory to Tom Ltd costing $25,000 for $40,000. Half of this inventory was sold to outside parties for $28,000 by 30/6/17. 2. On 1 Jan 2016 Harry Ltd sold inventory costing $8000 to Tom Ltd for $11000. Tom Ltd

treats the item as equipment and depreciates it at 5% per annum. 3.On 1 July 2016 Harry sold plant to Tom for $7,000. The plant had cost Harry $8,000 on 1 July 2014 and it was being depreciated at 10% per annum. Tom regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 Harry Ltd held inventory that it had purchased from Tom Ltd on 1 June

2016 at a profit of $4000. All inventory was sold by 30 June 2017 5. Tom Ltd accrues dividends from Harry Ltd once they are declared. 6. Tom Ltd has earned $1200 in interest revenue in the 2017 financial year from Harry Ltd. 7. Tom Ltd has earned $2400 in service revenue in the 2017 financial year from Harry Ltd. 8. Assume a tax rate of 30%.

Share Capital General Reserve Retained Earnings

320,000 78,000 65,000

		Trial Balances
		As at 30 June 2017
	Tom Ltd		Harry Ltd
	DR	CR	DR	CR
Sales Revenue		1,250,000		668,200
Cost of Sales	945,500		393,500
Wages and Salaries	61,000		48,500
Depreciation Expense	5,200		6,500
Service Expense	3,500		2,400
Interest Expense	7,000		1,200
Other Expenses	4,000		6,000
Gain on Sale of Non Current Assets	-			5,600
Service Revenue		2,400		5,000
Interest Revenue		1,200		7,000
Dividend Revenue		13,500		-
Income tax expense	97,120		85,000
Retained Earnings 1/7/16		100,820		71,780
Dividend Paid	10,000		6,500
Dividend Declared	12,000		7,000
Share Capital		500,000		320,000
General Reserve		135,000		96,000
Other Equity 1/7/16		4,000		12,000
Gains on Financial Assets		1,000		6,000
Loan Payable to Tom Ltd		-		9,000
Deferred Tax Liability		67,000		30,000
Dividend Payable		18,000		7,000
Shares in Harry Ltd	500,000		-
Cash	125,600		109,500
Inventories	168,000		69,480
Other Current Assets	11,000		300,000
Dividend Receivable	7,000		-
Loan receivable from Harry Ltd	9,000		-
Financial Assets	15,000		68,000
Plant and Equipment	52,000		45,000
Acc. Depreciation Plant		10,000		31,000
Land	70,000		120,000
	2,102,920	2,102,920	1,268,580	1,268,580

Required:

A. Prepare the acquisition analysis at 1 July 2013. B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013. C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017. D. Prepare the consolidation worksheet journal entries to eliminate the effects of inter-entity transactions as at 30 June 2017. E. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2017. F. Prepare the consolidated statement of profit or loss and other comprehensive income, the consolidated balance sheet and the consolidated statement of changes in equity for the period ended 30 June 2017.

Presentation

Your work should be prepared using an Excel spreadsheet and saved as a PDF to be submitted via LMS by the due date.

PLEASE NOTE It is the responsibility of each group member to check the entire assignment prior to submission.

Each group member must read and sign the Plagiarism Declaration on the Cover Sheet placed on LMS under the Assessments Tab. Please include this cover sheet as the first page in your submitted assignment.