Question
Below are extract statements of H Ltd and its wholly owned subsidiary S Ltd. On 1 January 20.4, the date H Ltd acquired S Ltd,
Below are extract statements of H Ltd and its wholly owned subsidiary S Ltd.
On 1 January 20.4, the date H Ltd acquired S Ltd, the net assets of S Ltd was represented by the following:
Contributed equity $80,000
Retained income $45,000
| H Ltd | S Ltd | |
| Statements of Financial Position at 31 December 20.7 | ||
| ASSETS | ||
| Property plant and equipment | $ 80,000.00 | $ 150,000.00 |
| Investment in S Ltd - 64 000 ordinary capital | $ 130,000.00 | |
| Investment in S Ltd: Loan | $ 50,000.00 | |
| Inventory | $ 65,000.00 | $ 55,000.00 |
| Accounts Receivable | $ 55,000.00 | $ 35,000.00 |
| Bank | $ 30,000.00 | |
| Total assets | $ 410,000.00 | $ 240,000.00 |
| EQUITY AND LIABILITIES | ||
| Contributed equity | $ 100,000.00 | $ 80,000.00 |
| Retained income | $ 165,000.00 | $ 90,000.00 |
| Long term loans | $ 75,000.00 | |
| Loan from H Ltd | $ 50,000.00 | |
| Accounts Payables | $ 70,000.00 | $ 10,000.00 |
| Bank overdraft | $ 10,000.00 | |
| Total equity and liability | $ 410,000.00 | $ 240,000.00 |
| Extract Statement of Comprehensive Income for the period ending 31 December 20.7 | H Ltd | S Ltd |
| Sales | $ 130,000.00 | $ 100,000.00 |
| Profit before tax | $ 130,000.00 | $ 100,000.00 |
| Tax | -$ 36,000.00 | -$ 30,000.00 |
| Profit for the year | $ 94,000.00 | $ 70,000.00 |
| Extract Statement of Changes in Equity for the period ending 31 December 20.7 | H Ltd | S Ltd |
| Balance 1 January 20.7 | $ 107,000.00 | $ 20,000.00 |
| Movement in equity for the year: | ||
| Dividends | -$ 36,000.00 | |
| Total comprehensive income for the year | $ 94,000.00 | $ 70,000.00 |
| Balance 31 December 20.7 | $ 165,000.00 | $ 90,000.00 |
Required:
- Prepare the consolidation worksheet and relevant financial statements. You can access the file from Moodle. (24 marks)
(c) Assume $5,000 of unrealised profit was part of stock of the group and the tax rate is 28%. Provide the journal entries with narrations for this transaction (do not show this on your consolidation worksheet) (6 marks)
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Intermediate Accounting principles and analysis
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
2nd Edition
471737933, 978-0471737933
