corporate accounting

Case 3: Consolidation worksheet, previously held investment in subsidiary (5%} On 1 August 2018, Eco Ltd acquired 10% of the shares in Fico Ltd for $8000. Eco Ltd used the fair value method to measure this investment with movements in fair value being recognised in profit or loss. At 1 July 2017, the fair value of this investment was $15 400. The original investment in Fico Ltd was due to the fact that Fico Ltd was undertaking research into particular microbiological elements that could influence the profitability of Eco Ltd. With the continuing success of this research. Eco Ltd decided to acquire the remaining shares (cum div.) in Fico Ltd. 0n 1 July 2017, Eco Ltd made an offer to buy the remaining shares in Fico Ltd for $151 000 cash. This offer was accepted by the shareholders of Fico Ltd. 0n 1 July 2017, immediately after the business combination, the statement of financial position of Fico Ltd was as follows: Eco Ltd Fico Ltd Share capital 130,000 90,000 General reserve 56,500 12,000 Retained earnings 93,500 36,000 Total equity 280,000 138,000 Dividend payable 25.000 12,600 Other liabilities 75,000 25,000 Total liabilities 100,000 37,600 Total equity and liabilities 380,000 175,600 Cash 1 1,000 20,600 Receivables 25.200 20,000 Other assets 10,000 8,000 Shares in Fico Ltd 153.800 - Inventories 55,000 42,000 Plan and equipment 210,000 107,000 Accumulated depreciation - 85,000 - 22,000 Total assets 380,000 175,600 0n analysing the financial statements of Fico Ltd, Eco Ltd determined that all the assets and liabilities recorded by Fico Ltd were shown at amounts equal to their fair values except for: Carrying amount Fair value Plant and equipment (cost $46 000) S 35 000 $43 000 Inventories 42 000 46000 The plant and equipment is expected to have a further 4-year life and is depreciated on a straight- line basis. The inventory was all sold by 30 June 2018. Fico Ltd had expensed all the outlays on research and development. Eco Ltd placed a fair value of $12 000 on this asset. Fico Ltd also had reported a contingent liability at 30 June 2017 in relation to claims by customers for damaged goods. Eco Ltd placed a fair value of $3000 on these claims. The research and development is amortised evenly over a 10-year period. The claims by customers were settled in May 2018 for $2800. The company tax rate is 30%. Req ul red (a) Prepare the consolidated financial statements of Eco Ltd at 1 July 2017, immediately after the business combination. (b) Prepare the consolidation worksheet entries at 30 June 2018