Case Study 7

On 1 July 2017 South Ltd acquired all the share capital of West Ltd for $160,000. At that date the accounts of West Ltd show the following:

Share capital

$100,000

General reserve

30,000

Retained earnings

20,000

Additional information for the year ended 30 June 2017

1. Sales by West Ltd to South Ltd during the year amounted to $ 110,000.

2. Unrealised profit in inventory of South Ltd:

01/07/2016$5,000

30/06/2017$3,000

3. On 1 January 2010 South Ltd sold an item of plant to West Ltd for $45,000, making a profit on the sale of $10,000. West Ltd depreciates plant at 20% per annum on cost.

4. Included in the other assets of South Ltd is a three-year loan of $20,000 at 15% per annum to West Ltd made on 1 April 2017. Three months interest was accrued by both companies at 30 June 2016.

5. Goodwill is tested annually for impairment; goodwill has been impaired by:

$1,000 for the year ended 30 June 2016; and

$2,000 for the year ended 30 June 2017.

a.Complete the consolidation worksheet.

Consolidation Worksheet

South Ltd

West Ltd

Eliminations

Consolidated

30 June 2017

Dr

Cr

Statements

Sales

900,000

500,000

110,000

=900,000+500,000-110,000=1,290,000

Inventory 01/07/2016

70,000

60,000

5,000

125,000

Purchases

510,000

400,000

110,000

800,000

580,000

460,000

Inventory 30/06/2017

90,000

80,000

3000

=90000+80000-3000=167,000

Less Cost of Goods Sold

490,000

380,000

Gross Profit

410,000

120,000

Expenses

210,000

40,000

200,000

80,000

Add Other Income

Profit on Sale of Plant

10,000

0

Interest Income

750

0

Dividends from West Ltd

30,000

0

Profit before Tax

240,750

80,000

Less Income Tax expense

90,000

30,000

Profit

150,750

50,000

Retained Earnings 01/07/2016

80,000

40,000

Available

230,750

90,000

Appropriations:

Dividend - Paid

40,000

30,000

Dividend - Declared

50,000

20,000

Total Appropriations

90,000

50,000

Retained Earnings 30/06/2017

140,750

40,000

General Reserve

100,000

50,000

Share Capital

200,000

100,000

Dividend Payable

50,000

20,000

Other Current Liabilities

110,000

60,000

Non-Current Liabilities

60,000

20,000

660,750

290,000

Shares in West Ltd

160,000

0

Plant and Equipment (net)

260,000

120,000

Inventory

90,000

80,000

Other Assets

150,750

90,000

Goodwill on Consolidation

0

Accum Impairment - Goodwill

660,750

290,000

Case Study 5

The accounts of Eemi Ltd as at 1 July 2019 show:

$000

Share Capital - 9,000,000 fully paid ordinary shares

9,000

Retained Earnings (credit balance)

500

General reserve

200

Asset Revaluation reserve

300

Available for Sale Investments - Revaluation reserve

200

The following relates to the year ending 30 June 2010:

Profit after tax

4,500

Dividends paid/declared:

Interim dividend paid

90

Final dividend declared

220

Amount transferred to general reserve

80

Shares issued (2,000,000 shares payable fully on application)

6,000

Other Gains or (Losses) not yet recognised in the accounts for year ended 30 June 2010

$000

Gain on Revaluation of land (valuation by independent valuer)

90

Revaluation Decrement (loss) on available-for-sale investments

(65)

Additional Information

The valuation decrement on available-for-sale investments is to be recognised in the available-for-sale investments - revaluation reserve.

The company tax rate is 30%

Task 5

a.Prepare journal entries to record the valuation adjustments, including any tax effect.

b.Prepare statement of changes in equity for the year ended 30 June 2018.

1.What are the common coding and classification systems that could be used in the workplace to systematically code, classify and check data for accuracy and reliability?