Grape Ltd acquired all the issued shares of Duck Ltd for $940 000 cash on 1 July 2020. The following information is available at this acquisition date: The equity of Duck Ltd is provided below: Share capital $495 000 Retained earnings 280 000 General reserve 125 000 All the identifiable assets and liabilities of Duck Ltd were recorded at fair value in the statement of financial position. The company income tax rate is 30%. The following transactions and events occurred during the year ended 30 June 2021: 1. During the year Grape Ltd sold inventory to Duck Ltd for $55,000 at cost plus 20%. Duck Ltd has sold 10% of these items externally as at 30 June 2021. 2. On 1 April 2021, Duck Ltd sold an item of inventory to Grape Ltd for $28,000. This inventory had cost Duck Ltd $20,000. Grape Ltd treated the item as plant and will depreciate it at 20% p.a. 3. Grape Ltd sold land to Duck Ltd for $25,000 which had originally cost $32,000. 4. Dividends: Duck Ltd paid $18 000 interim dividends in September 2020, and Grape Ltd declared $26 000 dividends in May 2021 (to be paid in October 2021). 5. On 1 July 2020, Grape Ltd provided an office for Duck Ltd's administrative staff to use. Grape Ltd charges $700 per month. The last rental receipt received by Grape Ltd was on 30 April 2021. Required: Part (a) (36 marks) Analyse the completed worksheet attached for the Grape group. Using the information provided in the worksheet, prepare an evaluation report in word, detailing each omission and error. For each error: 1. List the accounts and amounts, which are incorrect for each consolidation adjustment. 2. Explain WHY the entry is incorrect. Include formulas where possible in your explanation. Grape Duck Adjustments Ltd ($) Ltd ($) Dr ($) Cr ($) Sales revenue 180000 131000 55,000 28,000 Cost of sales -88000 -58000 11,000 20,000 Gross profit 92000 73000 Dividend revenue 24000 0 44,000 Rent revenue 8400 0 1,400 Proceeds from sale of land 0 25000 25,000 - 12000 -8000 1,600 Depreciation Carrying amount of equipment sold 0 -32000 32,000 Rent expense -8400 1,400 - 15000 Other expenses Profit before tax -32000 80400 34600 Less: Income tax expense 24120 10380 120 13,200 2,100 2.400 Retained earnings (1/7/20) 72000 280000 280,000 0 -18000 18,000 Dividend paid Dividend declared Retained earnings (30/6/21) 0 -26,000 46000 262000 Share capital 165000 495000 495,000 Duck Grape Ltd ($) Adjustments Dr ($) Cr ($) Ltd ($) General reserve 30000 125000 125,000 BCVR 0 0 65,000 737000 38700 Accounts payable Other Payables Dividend payable 74120 1400 26000 0 26.000 Deferred Tax liability 50000 11000 2,100 Cash 25000 22600 Accounts receivable 12000 12720 Dividend receivable 52000 0 Other receivables 1400 12000 Inventories 45000 22000 44,000 8,000 Investment in Duck Ltd 940000 0 940,000 Land 52000 84000 7,000 Plant 60000 78000 Z Acc'd depreciation -38000 -26000 1,600 Buildings Acc'd depreciation 55000 -20000 62000 - 15000 Goodwill 0 25000 65,000 Deferred tax asset 0 680000 13,200 120 2,400 Tip: Complete Part B and Part C first and then go back and find the errors in Port A! Suggested format for Part A - Evaluation report: Amount Evaluation report - why is it wrong? Account name Example only: Buildings at cost $62,000 Missing adjustment for unrealised profit of $XX amount. Formula is: (Show workings to justify your findings) Part (b) Prepare the consolidation entries as at 30 June 2021 in excel using the template below. Include narrations for each entry: (28 marks) Date Particulars Reference Debit Credit Part (c): Worksheet (24 marks) Using excel, prepare the consolidation worksheet as at 30 June 2021, showing all entries including the corrected entries discussed in Part (a). Each entry needs to be entered as a separate amount and not entered as subtotals in the worksheet. Round your answers to zero decimal places. The worksheet template is provided below. Group ($) Ref Grape Ltd ($) 180,000 Duck Ltd ($) 131,000 Adjustments Debit ($) Credit ($) Sales revenue Cost of sales (88,000) (58,000) 73,000 92,000 24,000 8,400 25,000 (12,000) (8,000) Gross profit Dividend revenue Rent revenue Proceeds from sale of land Depreciation Carrying amount of equipment sold Rent expense Other expenses Profit before tax Less: Income tax expense (32,000) (32,000) 80,400 (8,400) (15,000) 34,600 24,120 10,380 56,280 24,220 72,000 280,000 (18,000) (26,000) Profit after tax for the year Retained earings (1/7/20) Dividend paid Dividend declared Retained earnings (30/6/21) Share capital General reserve BCVR Shareholders' equity 102,280 286,220 165,000 30,000 495,000 125,000 297,280 906,220 Grape Ref Group (S) Duck Ltd ($) Adjustments Debit($) Credit ($) Ltd ($) 38,700 1,400 737,000 74,120 26,000 50,000 887,120 11,000 51,100 1,184,400 957,320 22,600 12,720 Liabilities Accounts payable Other Payables Dividend payable Deferred Tax liability Total liabilities Total liabilities & Equity Assets Cash Accounts receivable Dividend receivable Other receivables Inventories Investment in Duck Ltd Land Plant Acc'd depreciation Buildings Acc'd depreciation Goodwill Deferred tax asset 12,000 22,000 25,000 12,000 52,000 1,400 45,000 940,000 52,000 60,000 (38,000) 55,000 (20,000) 84,000 78,000 (26,000) 62,000 (15,000) 25,000 680,000 Total assets 1 184,400 957,320 Part (d): Group financial statements (12 marks) Using excel, prepare the Statement of Financial position for Grape Ltd as at 30 June 2021. Grape Ltd acquired all the issued shares of Duck Ltd for $940 000 cash on 1 July 2020. The following information is available at this acquisition date: The equity of Duck Ltd is provided below: Share capital $495 000 Retained earnings 280 000 General reserve 125 000 All the identifiable assets and liabilities of Duck Ltd were recorded at fair value in the statement of financial position. The company income tax rate is 30%. The following transactions and events occurred during the year ended 30 June 2021: 1. During the year Grape Ltd sold inventory to Duck Ltd for $55,000 at cost plus 20%. Duck Ltd has sold 10% of these items externally as at 30 June 2021. 2. On 1 April 2021, Duck Ltd sold an item of inventory to Grape Ltd for $28,000. This inventory had cost Duck Ltd $20,000. Grape Ltd treated the item as plant and will depreciate it at 20% p.a. 3. Grape Ltd sold land to Duck Ltd for $25,000 which had originally cost $32,000. 4. Dividends: Duck Ltd paid $18 000 interim dividends in September 2020, and Grape Ltd declared $26 000 dividends in May 2021 (to be paid in October 2021). 5. On 1 July 2020, Grape Ltd provided an office for Duck Ltd's administrative staff to use. Grape Ltd charges $700 per month. The last rental receipt received by Grape Ltd was on 30 April 2021. Required: Part (a) (36 marks) Analyse the completed worksheet attached for the Grape group. Using the information provided in the worksheet, prepare an evaluation report in word, detailing each omission and error. For each error: 1. List the accounts and amounts, which are incorrect for each consolidation adjustment. 2. Explain WHY the entry is incorrect. Include formulas where possible in your explanation. Grape Duck Adjustments Ltd ($) Ltd ($) Dr ($) Cr ($) Sales revenue 180000 131000 55,000 28,000 Cost of sales -88000 -58000 11,000 20,000 Gross profit 92000 73000 Dividend revenue 24000 0 44,000 Rent revenue 8400 0 1,400 Proceeds from sale of land 0 25000 25,000 - 12000 -8000 1,600 Depreciation Carrying amount of equipment sold 0 -32000 32,000 Rent expense -8400 1,400 - 15000 Other expenses Profit before tax -32000 80400 34600 Less: Income tax expense 24120 10380 120 13,200 2,100 2.400 Retained earnings (1/7/20) 72000 280000 280,000 0 -18000 18,000 Dividend paid Dividend declared Retained earnings (30/6/21) 0 -26,000 46000 262000 Share capital 165000 495000 495,000 Duck Grape Ltd ($) Adjustments Dr ($) Cr ($) Ltd ($) General reserve 30000 125000 125,000 BCVR 0 0 65,000 737000 38700 Accounts payable Other Payables Dividend payable 74120 1400 26000 0 26.000 Deferred Tax liability 50000 11000 2,100 Cash 25000 22600 Accounts receivable 12000 12720 Dividend receivable 52000 0 Other receivables 1400 12000 Inventories 45000 22000 44,000 8,000 Investment in Duck Ltd 940000 0 940,000 Land 52000 84000 7,000 Plant 60000 78000 Z Acc'd depreciation -38000 -26000 1,600 Buildings Acc'd depreciation 55000 -20000 62000 - 15000 Goodwill 0 25000 65,000 Deferred tax asset 0 680000 13,200 120 2,400 Tip: Complete Part B and Part C first and then go back and find the errors in Port A! Suggested format for Part A - Evaluation report: Amount Evaluation report - why is it wrong? Account name Example only: Buildings at cost $62,000 Missing adjustment for unrealised profit of $XX amount. Formula is: (Show workings to justify your findings) Part (b) Prepare the consolidation entries as at 30 June 2021 in excel using the template below. Include narrations for each entry: (28 marks) Date Particulars Reference Debit Credit Part (c): Worksheet (24 marks) Using excel, prepare the consolidation worksheet as at 30 June 2021, showing all entries including the corrected entries discussed in Part (a). Each entry needs to be entered as a separate amount and not entered as subtotals in the worksheet. Round your answers to zero decimal places. The worksheet template is provided below. Group ($) Ref Grape Ltd ($) 180,000 Duck Ltd ($) 131,000 Adjustments Debit ($) Credit ($) Sales revenue Cost of sales (88,000) (58,000) 73,000 92,000 24,000 8,400 25,000 (12,000) (8,000) Gross profit Dividend revenue Rent revenue Proceeds from sale of land Depreciation Carrying amount of equipment sold Rent expense Other expenses Profit before tax Less: Income tax expense (32,000) (32,000) 80,400 (8,400) (15,000) 34,600 24,120 10,380 56,280 24,220 72,000 280,000 (18,000) (26,000) Profit after tax for the year Retained earings (1/7/20) Dividend paid Dividend declared Retained earnings (30/6/21) Share capital General reserve BCVR Shareholders' equity 102,280 286,220 165,000 30,000 495,000 125,000 297,280 906,220 Grape Ref Group (S) Duck Ltd ($) Adjustments Debit($) Credit ($) Ltd ($) 38,700 1,400 737,000 74,120 26,000 50,000 887,120 11,000 51,100 1,184,400 957,320 22,600 12,720 Liabilities Accounts payable Other Payables Dividend payable Deferred Tax liability Total liabilities Total liabilities & Equity Assets Cash Accounts receivable Dividend receivable Other receivables Inventories Investment in Duck Ltd Land Plant Acc'd depreciation Buildings Acc'd depreciation Goodwill Deferred tax asset 12,000 22,000 25,000 12,000 52,000 1,400 45,000 940,000 52,000 60,000 (38,000) 55,000 (20,000) 84,000 78,000 (26,000) 62,000 (15,000) 25,000 680,000 Total assets 1 184,400 957,320 Part (d): Group financial statements (12 marks) Using excel, prepare the Statement of Financial position for Grape Ltd as at 30 June 2021