Case Scenario On 1 July 2019, Seacome Ltd acquired all issued shares of Heights Ltd on a cum dividend basis, paying $578 160 cash. At this date, Heights Ltd had recorded $24 000 dividend payable and an equity consisting of: Share capital $259 200 Retained earnings 172 800 General reserve 86 400 All the identifiable assets and liabilities of Heights Ltd were recorded at the amounts equal to their fair values at acquisition date except for: Asset Carrying Amount ($) Fair Value ($) Inventories 67 200 76 800 Plant (cost $480 000) 444 000 451 200 Additional information: The plant was considered to have a further 5-year life, and depreciated at 20% per annum on cost. All inventories were sold by 30 June 2020. In April 2020, Heights Ltd transferred $14 400 from Retained Earnings existing at 1 July 2019 to General Reserve. The dividend payable at the acquisition date was paid in May 2020. The company tax rate is 30%. Part A Problem Solving Practical (45 Marks) i. Prepare the acquisition analysis at 1 July 2019. Show all workings. (4 Marks) ii. Prepare the consolidation worksheet entries at 1 July 2019. Journal narrations are required. journal format based on the template below. (11 Marks) Date Details Debit ($) Credit ($) iii. Complete the consolidation worksheet for the group at 30 June 2020. consolidation worksheet using the template provided below. (15 Marks) iv. Prepare Consolidated Statement of Changes in Equity and Consolidated Statement of Financial Position for the group at 30 June 2020. (15 Marks) ACCT6005 Assessment 1 Brief T1 2020.docx Page 4 of 6 Seacome Group Ltd Consolidation Worksheet at 30 June 2020 Seacome Ltd ($) Heights Ltd ($) Adjustments Group Dr ($) Cr ($) ($) Revenue 1 200 000 266 400 Costs of sales (432 000) (110 400) Depreciation - Plant Other expenses (192 000) (96 000) Profit before tax 576 000 60 000 Income tax expense (268 800) (20 160) Profit 307 200 39 840 Retained earnings (1/7/19) 384 000 172 800 Transfer from BCVR - - Transfer from General reserve (0) (14 400) Retained earnings (30/6/20) 691 200 198 240 Share capital 1 816 800 259 200 BCVR - - General reserve 48 000 100 800 Total Equity 2 556 000 558 240 Deferred tax liability 9 600 Other liabilities 204 000 28 800 Total Liabilities 204 000 38 400 Total Equity & Liab 2 760 000 596 640 Cash 90 720 18 000 Inventories 147 120 47 760 Land 768 000 86 400 Plant 1 728 000 602 880 Acc'd depreciation (528 000) (158 400) Goodwill Shares in Heights Ltd 554 160 - Total Assets 2 760 000 596 640 ACCT6005 Assessment 1 Brief T1 2020.docx Page 5 of 6 Problem Solving Discussion Using the case scenario above and your responses to Part (a): i. Identify the adjustment entries, which are made in the consolidation worksheet for Seacome Group Ltd for the year ended 30 June 2020, will also be made in the group's consolidation worksheet for the year ended 30 June 2021 and 30 June 2022. Discuss the effects of these adjustment entries on the group's consolidation worksheet. ii. Discuss how the business combination valuation entries affect the pre-acquisition entries at the acquisition date and in the year ended 30 June 2020. You should make references to the relevant assets and liabilities in Seacome Group Ltd.