ACCT2201 GROUP CASE STUDY SEMESTER 1 2019 On 1 July 2013 David Ltd acquired all of the share capital of Goliath Limited for a consideration of $500,000 cash and a brand that was held in their accounts at a book value of $10,000 but at 1 July 2013 had a fair value of $24,000. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $12,700 The land was sold on 30/12/16 for $30000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Goliath Ltd consisted of: Share Capital 350,000 General Reserve 100,000 Retained Earnings 60,000 Information from the trial balances of David Ltd and Goliath Ltd at 30 June 2017 is presented overleaf. Additional Information 1. On 1 Jan 2017 Goliath Ltd sold inventory to David Ltd costing $40,000 for $50,000. Half of this inventory was sold to outside parties for $30,000 by 30/6/17. 2. On 1 Jan 2016 Goliath Ltd sold inventory costing $9000 to David Ltd for $12,000. David Ltd treats the item as equipment and depreciates it at 10% per annum. 3. On 1 July 2016 Goliath sold plant to David for $10,000. The plant had cost Goliath $10,000 on 1 July 2014 and it was being depreciated at 10% per annum. David regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 Goliath Ltd held inventory that it had purchased from David Ltd on 1 June 2016 at a profit of $8000. All inventory was sold by 30 June 2017. 5. David Ltd accrues dividends from Goliath Ltd once they are declared. 6. David Ltd has earned $1200 in interest revenue in the 2017 financial year from Goliath Ltd. 7. David Ltd has earned $4800 in service revenue in the 2017 financial year from Goliath Ltd. 8. Assume a tax rate of 30%. ASSET Book Value Market Value Inventory 10,000 12,000 Land 25,000 28,000 Plant 20,000 (less depn) - 3,000 17,000 21,000 Acounts Receivable 16,000 12,700 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. Trial Balances As at 30 June 2017 DR CR DR CR Sales Revenue 1,192,500 932,500 Cost of Sales 888,000 676,000 Wages and Salaries 61,000 32,000 Depreciation Expense 5,200 4,800 Service Expense 3,500 4,800 Interest Expense 7,000 1,200 Other Expenses 4,000 6,000 Gain on Sale of Non Current Assets - 7,000 Service Revenue 4,800 5,000 Interest Revenue 1,200 7,000 Dividend Revenue 16,000 - Income tax expense 97,120 118,480 Retained Earnings 1/7/16 100,820 70,280 Dividend Paid 10,000 7,000 Dividend Declared 12,000 9,000 Share Capital 500,000 350,000 General Reserve 146,000 100,000 Other Equity 1/7/16 4,000 12,000 Gains on Financial Assets 1,000 6,000 Loan Payable to David Ltd - 16,000 Deferred Tax Liability 52,000 30,000 Dividend Payable 12,000 9,000 Shares in Goliath Ltd 524,000 - Cash 86,000 147,500 Inventories 169,500 36,000 Other Current Assets 11,000 300,000 Dividend Receivable 9,000 - Loan receivable from Goliath Ltd 16,000 - Financial Assets 15,000 68,000 Plant and Equipment 52,000 28,000 Acc. Depreciation Plant 10,000 14,000 Land 70,000 120,000 2,040,320 2,040,320 1,558,780 1,558,780 David Ltd Goliath Ltd