ACCT2201 GROUP CASE STUDY SEMESTER 1 2023

On 1 July 2013 Ross Ltd acquired all of the share capital (cum div)of Zara Limited for a consideration of $650,000 cash and PPE with a fair value of $50,000. At the date of acquisition Zara's accounts showed a dividend payable of $10,000.

At acquisition 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 $18,000. The land was sold on 30/12/16 for $150000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Zara Ltd consisted of:

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

Additional Information

1. On 1 Jan 2017 Ross Ltd sold inventory to Zara Ltd costing $40,000 for $60,000. Half of this inventory was sold to outside parties by 30/6/17. 2. On 1 Jan 2016 Ross Ltd sold inventory costing $13000 to Zara Ltd for $18,000. Zara Ltd

treats the item as equipment and depreciates it at 10% per annum. 3.On 1 July 2016 Ross sold plant to Zara for $25,000. The plant had cost Ross $28,000 on 1 July 2014 and it was being depreciated at 10% per annum. Zara regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 Ross Ltd held inventory that it had purchased from Zara Ltd on 1 June

2016 at a profit of $3600. All inventory was sold by 30 June 2017 5. Zara Ltd accrues dividends from Ross Ltd once they are declared. 6. Zara Ltd has earned $600 in interest revenue in the 2017 financial year from Ross Ltd. 7. Zara Ltd has earned $4000 in service revenue in the 2017 financial year from Ross Ltd. 8. Assume a tax rate of 30%.

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 Ross Ltd Zara Ltd

DR CR DR CR

Sales Revenue Cost of Sales Wages and Salaries Depreciation Expense Service Expense Interest Expense Other Expenses

Gain on Sale of Non Current Assets Service Revenue Interest Revenue Dividend Revenue

Income tax expense Retained Earnings 1/7/16 Dividend Paid Dividend Declared Share Capital General Reserve Other Equity 1/7/16 Gains on Financial Assets (OCI) Loan Payable to Ross Ltd Deferred Tax Liability Dividend Payable Shares in Zara Ltd Cash Inventories Other Current Assets Dividend Receivable Loan receivable from Zara Ltd Financial Assets Plant and Equipment Acc. Depreciation Plant Land Deferred Tax Asset

650,000 253,000 17,000 3,500 9,300 4,000

-

162,000

12,000 16,000

690,000 86,000 169,500 11,000 4,500 25,000 18,000 450,000

1,455,000

5,600 1,200 9,500

190,820

800,000 90,000 4,000 1,000

- 4,900

16,000

90,000

325,000 215,000 8,000 4,800 5,600 6,000

169,000

5,000 4,500

- 64,080

291,000 100,000

-

- 68,000

500,000

1,075,000

40,000 5,000 7,000

- 85,000

500,000 60,000 12,000

6,000 25,000 6,480 4,500

120,000

-

180,000 2,668,020 2,668,020 1,945,980 1,945,980

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ACCT2201 GROUP CASE STUDY SEMESTER 12023 On 1 July 2013 Ross Ltd acquired all of the share capital (cum div) of Zara Limited for a consideration of $650,000 cash and PPE with a fair value of $50,000. At the date of acquisition Zara's accounts showed a dividend payable of $10,000. At acquisition 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 $18,000. The land was sold on 30/12/16 for $150000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Zara Ltd consisted of: Information from the trial balances of Zara Ltd and Ross Ltd at 30 June 2017 is presented overleaf. Additional information 1. On 1 Jan 2017 Ross Ltd sold inventory to Zara Ltd costing $40,000 for $60,000. Half of this inventory was sold to outside parties by 30/6/17. 2. On 1 Jan 2016 Ross Ltd sold inventory costing $13000 to Zara Ltd for $18,000. Zara Ltd treats the item as equipment and depreciates it at 10% per annum. 3.On 1 July 2016 Ross sold plant to Zara for $25,000. The plant had cost Ross $28,000 on 1 July 2014 and it was being depreciated at 10% per annum. Zara regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 Ross Ltd held inventory that it had purchased from Zara Ltd on 1 June 2016 at a profit of $3600. All inventory was sold by 30 June 2017 5. Zara Ltd accrues dividends from Ross Ltd once they are declared. 6. Zara Ltd has earned $600 in interest revenue in the 2017 financial year from Ross Ltd. 7. Zara Ltd has earned $4000 in service revenue in the 2017 financial year from Ross Ltd. 8. Assume a tax rate of 30%. 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. ACCT2201 GROUP CASE STUDY SEMESTER 12023 On 1 July 2013 Ross Ltd acquired all of the share capital (cum div) of Zara Limited for a consideration of $650,000 cash and PPE with a fair value of $50,000. At the date of acquisition Zara's accounts showed a dividend payable of $10,000. At acquisition 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 $18,000. The land was sold on 30/12/16 for $150000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of Zara Ltd consisted of: Information from the trial balances of Zara Ltd and Ross Ltd at 30 June 2017 is presented overleaf. Additional information 1. On 1 Jan 2017 Ross Ltd sold inventory to Zara Ltd costing $40,000 for $60,000. Half of this inventory was sold to outside parties by 30/6/17. 2. On 1 Jan 2016 Ross Ltd sold inventory costing $13000 to Zara Ltd for $18,000. Zara Ltd treats the item as equipment and depreciates it at 10% per annum. 3.On 1 July 2016 Ross sold plant to Zara for $25,000. The plant had cost Ross $28,000 on 1 July 2014 and it was being depreciated at 10% per annum. Zara regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 Ross Ltd held inventory that it had purchased from Zara Ltd on 1 June 2016 at a profit of $3600. All inventory was sold by 30 June 2017 5. Zara Ltd accrues dividends from Ross Ltd once they are declared. 6. Zara Ltd has earned $600 in interest revenue in the 2017 financial year from Ross Ltd. 7. Zara Ltd has earned $4000 in service revenue in the 2017 financial year from Ross Ltd. 8. Assume a tax rate of 30%. 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