Background Information:
"Consolidated Journal Entries" sheet
In this sheet, you are required to complete two (2) sections:
1) Acquisition analysis
Based on the information in the "Background information" sheet, provide the required calculations at the acquisition date.
2) Consolidation Adjustments at 30/6/2020
Use the relevant sub-heading sections available to record any consolidated journal entries you deem necessary at the balance date. The number of rows provided in each sub-heading section is deemed to be more than adequate. Note that you don't need to fill in every single row in order to complete journal entries.
When recording journal entries, no narrations are required and there is no need to indent account names.
On 1/07/2017 100% $9,224,000 5 6 7 8 9 10 11 12 13 Chief Ltd acquired: of the issued shares of Sub Ltd for: At the date of acquisition, the shareholders' equity of Sub Ltd consisted of: Share capital General Reserve Retained earning Total Equity $4,150,800 $1,037,700 $778,260 $5,966,760 As at 30/06/2020 the accounts of the two companies appear as follows: Chief Ltd Sales Cost of Goods Sold Depreciation expenses Interest expenses Other expenses 14,758,500 8,855,100 737,900 590,300 1,414,500 Sub Ltd $ 7,437,000 4,834,000 371,800 165,960 294,540 Other Income Interest revenue Dividend revenue 0 248,900 807,100 0 Income tax expense Net Profit after Tax Retained earnings(1/07/2019) Available for appropriation 1,265,000 2,951,700 4,427,500 7,379,200 531,200 1,239,500 1,297,100 2,536,600 Interim dividend paid Final dividend declared Retained earnings (30/06/2020) 691,800 1,153,000 5,534,400 345,900 461,200 1,729,500 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 Share Capital General reserve Total Owner's Equity 11,991,200 922,400 18,448,000 4,150,800 1,037,700 6,918,000 Debentures(due 30/06/2022) Dividend payable Deferred Tax Liability Other liabilities Total Liabilities 0 1,153,000 1,383,600 2,075,400 4,612,000 1,383,000 461,200 115,300 346,500 2,306,000 Total Liabilities & Owner's Equity 23,060,000 9,224,000 Assets Dividend receivable Inventory Non-current assets (depreciable) Accumulated depreciation Land Investment in Sub Ltd Debentures in Sub Ltd Other assets Total Assets 461,200 3,228,400 6,226,200 -2,490,400 3,920,200 9,224,000 1,383,000 1,107,400 23,060,000 0 553,400 3,689,600 -737,900 3,689,600 0 0 2,029,300 9,224,000 60 Additional information: a) At date of acquisition, all identifiable net assets of Sub Ltd were recorded at fair value, with the exception of a block of land in the books of Sub Ltd. The block of land had a carrying value of: and a fair value of: $3,689,600 $5,160,000 b) The directors apply the impairment test for goodwill annually. As at 30/06/2020 The directors have determined the goodwill should be completely written off. The cumulative goodwill impairment write-downs for prior years totalled: $1,782,000 On 1/07/2018 c) A non-current asset owned (Plant) by Chief Ltd was sold to Sub Ltd. Cost of the asset was: Accumulated depreciation of the asset was: The asset was sold for: Sub Ltd estimated this item had a remaining useful life of: and residual value of: $1,652,000 $590,000 $1,475,000 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 4 years $0 $968,000 d) The opening inventory of Chief Ltd includes unrealised profit of: on inventory transferred from Sub Ltd during the prior financial year. By 30/06/2020 all of this inventory was sold by Chief Ltd to parties external to the Group. e) During the current year, Chief Ltd purchased inventory from Sub Ltd for: This inventory had previously cost Sub Ltd: Percentage of this inventory sold to outsiders by Chief Ltd during the year was: $4,196,000 $1,678,000 50% f) Chief Ltd holds debentures in Sub Ltd amounting to On 30/06/2020 Sub Ltd paid the annual interest in debentures at a rate of. $1,383,000 12% g) Chief Ltd holds no investment in shares except for those held in Sub Ltd. Accordingly, examination of the dividend revenue and dividend receivable accounts in Chief Ltd's financial statements indicates that Chief Ltd has recognised dividend revenue prior to receipt 87 88 89 h) The tax rate is: 30% 4 1 CONSOLIDATED JOURNAL ENTRIES: 2 3 Acqusition Information 5 Ownership 6 Acquirer 7 Acquiree: 8 Acqusition Date: Consolidation Date: 10 Years since acqusition 11 Tax Rate 12 13 Consolidation Date Information 14 Share Capital of Sub Ltd on Date of Acquisition 15 Revaluation Reserve of Sub Ltd on Date of Acquisition 16 General Reserve of Sub Ltd on Date of Acquisition 17 Retained Earnings of Sub Ltd on Date of Acquisition 18 Dividend Declared by Sub Ltd 19 Dividend Paid by Sub Ltd 20 Total goodwill written off for prior years 100% Chief Ltd Sub Ltd 1/07/2017 30/06/2020 3 30% 9 $4,150,800 $0 $1,037,700 $778,260 $461,200 $345,900 $1,782,000 22 1. Acqusition Analysis 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 2. Consolidation Adjustments at 30/6/2020 38 Ref 39 A Revaluation entries 40 A1 41 A2 42 A3 43 A4 Dr Cr 44 O O O O O COCO a B Elimination of the Investment in Sub Ltd and recognition of goodwill B1 B2 B3 B4 B5 B6 B7 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Elimination of intra-group sale of inventory and unrealised profit in Sub Ltd Ltd and Restatement of overstated inventory in Chief Ltd C1 C2 C3 041 C5 C6 DElimination of unrealised profit in openging inventory and its tax effect D1 D2 D3 04 E Profit/Loss on the sale of non-current asset - Plant E1 E2 E3 E41 E5 E6 E71 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 FAdjusting depreciation after the sale of non-current asset - Plant F1 F2 F3 F4 F5 F6 F7 F81 86 87 G Elimination of intragroup debentures 88 G1 89 G2 90 G3 91 92 Elimination of intragroup interest on debentures 93 H1 94 H2 95 H3 96 97 Elimination of final dividend proposed 98 J1 99 J2 100 13 101 14 102 J5 103 104 Elimination of interim dividend paid 105 K1 106 K21 107 K3 108 109 4 Goodwill Impairment 110 L1 111 L2 112 113 L41 13 On 1/07/2017 100% $9,224,000 5 6 7 8 9 10 11 12 13 Chief Ltd acquired: of the issued shares of Sub Ltd for: At the date of acquisition, the shareholders' equity of Sub Ltd consisted of: Share capital General Reserve Retained earning Total Equity $4,150,800 $1,037,700 $778,260 $5,966,760 As at 30/06/2020 the accounts of the two companies appear as follows: Chief Ltd Sales Cost of Goods Sold Depreciation expenses Interest expenses Other expenses 14,758,500 8,855,100 737,900 590,300 1,414,500 Sub Ltd $ 7,437,000 4,834,000 371,800 165,960 294,540 Other Income Interest revenue Dividend revenue 0 248,900 807,100 0 Income tax expense Net Profit after Tax Retained earnings(1/07/2019) Available for appropriation 1,265,000 2,951,700 4,427,500 7,379,200 531,200 1,239,500 1,297,100 2,536,600 Interim dividend paid Final dividend declared Retained earnings (30/06/2020) 691,800 1,153,000 5,534,400 345,900 461,200 1,729,500 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 Share Capital General reserve Total Owner's Equity 11,991,200 922,400 18,448,000 4,150,800 1,037,700 6,918,000 Debentures(due 30/06/2022) Dividend payable Deferred Tax Liability Other liabilities Total Liabilities 0 1,153,000 1,383,600 2,075,400 4,612,000 1,383,000 461,200 115,300 346,500 2,306,000 Total Liabilities & Owner's Equity 23,060,000 9,224,000 Assets Dividend receivable Inventory Non-current assets (depreciable) Accumulated depreciation Land Investment in Sub Ltd Debentures in Sub Ltd Other assets Total Assets 461,200 3,228,400 6,226,200 -2,490,400 3,920,200 9,224,000 1,383,000 1,107,400 23,060,000 0 553,400 3,689,600 -737,900 3,689,600 0 0 2,029,300 9,224,000 60 Additional information: a) At date of acquisition, all identifiable net assets of Sub Ltd were recorded at fair value, with the exception of a block of land in the books of Sub Ltd. The block of land had a carrying value of: and a fair value of: $3,689,600 $5,160,000 b) The directors apply the impairment test for goodwill annually. As at 30/06/2020 The directors have determined the goodwill should be completely written off. The cumulative goodwill impairment write-downs for prior years totalled: $1,782,000 On 1/07/2018 c) A non-current asset owned (Plant) by Chief Ltd was sold to Sub Ltd. Cost of the asset was: Accumulated depreciation of the asset was: The asset was sold for: Sub Ltd estimated this item had a remaining useful life of: and residual value of: $1,652,000 $590,000 $1,475,000 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 4 years $0 $968,000 d) The opening inventory of Chief Ltd includes unrealised profit of: on inventory transferred from Sub Ltd during the prior financial year. By 30/06/2020 all of this inventory was sold by Chief Ltd to parties external to the Group. e) During the current year, Chief Ltd purchased inventory from Sub Ltd for: This inventory had previously cost Sub Ltd: Percentage of this inventory sold to outsiders by Chief Ltd during the year was: $4,196,000 $1,678,000 50% f) Chief Ltd holds debentures in Sub Ltd amounting to On 30/06/2020 Sub Ltd paid the annual interest in debentures at a rate of. $1,383,000 12% g) Chief Ltd holds no investment in shares except for those held in Sub Ltd. Accordingly, examination of the dividend revenue and dividend receivable accounts in Chief Ltd's financial statements indicates that Chief Ltd has recognised dividend revenue prior to receipt 87 88 89 h) The tax rate is: 30% 4 1 CONSOLIDATED JOURNAL ENTRIES: 2 3 Acqusition Information 5 Ownership 6 Acquirer 7 Acquiree: 8 Acqusition Date: Consolidation Date: 10 Years since acqusition 11 Tax Rate 12 13 Consolidation Date Information 14 Share Capital of Sub Ltd on Date of Acquisition 15 Revaluation Reserve of Sub Ltd on Date of Acquisition 16 General Reserve of Sub Ltd on Date of Acquisition 17 Retained Earnings of Sub Ltd on Date of Acquisition 18 Dividend Declared by Sub Ltd 19 Dividend Paid by Sub Ltd 20 Total goodwill written off for prior years 100% Chief Ltd Sub Ltd 1/07/2017 30/06/2020 3 30% 9 $4,150,800 $0 $1,037,700 $778,260 $461,200 $345,900 $1,782,000 22 1. Acqusition Analysis 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 2. Consolidation Adjustments at 30/6/2020 38 Ref 39 A Revaluation entries 40 A1 41 A2 42 A3 43 A4 Dr Cr 44 O O O O O COCO a B Elimination of the Investment in Sub Ltd and recognition of goodwill B1 B2 B3 B4 B5 B6 B7 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Elimination of intra-group sale of inventory and unrealised profit in Sub Ltd Ltd and Restatement of overstated inventory in Chief Ltd C1 C2 C3 041 C5 C6 DElimination of unrealised profit in openging inventory and its tax effect D1 D2 D3 04 E Profit/Loss on the sale of non-current asset - Plant E1 E2 E3 E41 E5 E6 E71 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 FAdjusting depreciation after the sale of non-current asset - Plant F1 F2 F3 F4 F5 F6 F7 F81 86 87 G Elimination of intragroup debentures 88 G1 89 G2 90 G3 91 92 Elimination of intragroup interest on debentures 93 H1 94 H2 95 H3 96 97 Elimination of final dividend proposed 98 J1 99 J2 100 13 101 14 102 J5 103 104 Elimination of interim dividend paid 105 K1 106 K21 107 K3 108 109 4 Goodwill Impairment 110 L1 111 L2 112 113 L41 13
