Coperate accounting and reporting
On 1 July 2021, Ingrid Lid acquired all the issued shares of Isabella Lid. The consideration for the acquisition was $47 350 cash plus 100 000 shares in Ingrid Lid, which had a fair value of $2 per share. At the acquisition date, Isabella Lid had inventories with a fair value $1500 greater than carrying amount. All these inventories were sold by Isabella Lid prior to 30 June 2022. Isabella Ltd conducts a research and development division. It has expensed all past outlays. At the acquisition date, Ingrid Ltd assessed there was an in-process research and development asset with a fair value of $12 000. Ingrid decided that $3000 of this asset should be impaired for the year to 30 June 2022. The income tax rate is 30% Intragroup transactions occurring in the annual period ended 30 June 2022 were as follows. (a) During the course of the year, Isabella Lid sold inventories to Ingrid Lid. Total sales were $60 000, these being sold at cost plus 25%. At 30 June 2022, Ingrid Lid still held inventories that it had bought from Isabella Lid for $15 000. (b) On 1 January 2022, Ingrid Ltd acquired 900 $100 8% debentures previously issued by Isabella Ltd. These were acquired on the open market for $85 500. Interest on debentures is paid half-yearly. Interest due on 30 June 2022 has been paid by Isabella Ltd. (c) On 1 April 2022, Ingrid Ltd sold an inventory item to Isabella Lid for $45 000. This asset had cost Isabella Ltd $36 000 to manufacture. The asset is used by Isabella Lid as part of its plant and machinery. The depreciation rate used by Isabella Lid for this type of asset is 20% p.a. on cost. (d) On 1 March 2022, Isabella Lid declared and paid a dividend of $14 700 from its profits. On 30 June 2022, Isabella Ltd declared a further dividend of $10 800. The financial information provided by the two entities for 30 June 2022 was as follows: Ingrid Ltd Isabella Ltd Sales $ 352 100 $ 272 000 Dividend revenue 25 500 5 000 ACC705 CORPORATE ACCOUNTING AND REPORTING T124 Page 10 of 17 AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD ABN: 72 132 629 979 CRICOS 03171A KING'S OWN INSTITUTE* K >KO Success in Higher Education Other income/gains 10 000 23 000 387 600 300 000 Cost of sales 184 500) (180 000) Other expenses (51 900) (33 000) (236 400) (213 000) Profit before income tax 151 200 87 000 Income tax expense (48 000) (30 000) Profit for the year 103 200 57 000 Retained earnings (1/7/21) 36 000 18 000 139 200 75 000 Dividend paid (51 000) (14 700) Dividend declared (36 000) (10 800) 87 000 (25 500) Retained earnings (30/6/22) 52 200 49 500 Share capital 480 000 180 000 General reserve 102 000 36 000 Total equity $ 634 200 $ 265 500 Deferred tax liabilities $ 19 500 $ 7 500 8% debentures 120 000 Dividend payable 24 000 10 800 Provisions 18 00 35 460 Payables 16 500 15 000 Total liabilities $ 78 000 $ 188 760 Total equity and liabilities $ 712 200 $ 454 260 Plant and machinery 160 000 165 000 Accumulated depreciation (60 000) (39 000) Land 143 450 225 000 Debentures in Isabella Ltd 85 500 Shares in Isabella Ltd 247 350 Cash 1 150 5 260 Receivables 31 750 15 500 Inventories 103 000 82 500 Total assets $ 712 200 $ 454 260 ACC705 CORPORATE ACCOUNTING AND REPORTING T124 Page 11 of 17 *AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD (@ ABN: 72 132 629 979 CRICOS 03171A KING'S OWN INSTITUTE* K >KO Success in Higher Education Submission requirements details: Required 1. Calculate acquisition analysis as of 1 July 2021 Prepare the consolidation journal entries for 30 June 2022 Complete the consolidated worksheet for 30 June 2022 4. Prepare the consolidated financial statements at 30 June 2022 5. Write a report to explain the consolidation process as per AASB10 for wholly owned entities and provide suitable explanations for intragroup adjustments (b) and (c) in additional information above. 6. Upload to Moodle drive
