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I need the solution of this calculation of corporate accounting for my final exam preparation.

ACCG926 - CORPORATE ACCOUNTIN SESSION 2 2015 TOPIC 10 - IN CLASS CASE STUDY You are a CPA working for Fast-Air Pty Limited (Fast-Air), a company involved in the design and construction of jet engine December financial year end. Fast-Air is currently involved in discussions with Hydro-Speed Pty Limited (Hydro-Speed), an entity involved in the design a a prototype of a hydro powered engine that can be adapted for use in aircraft. Fast-Air and Hydro-Speed are considering aim of this business will be to manufacture the new hydro powered engine that will be able to be used to power both ferries The benefits for Fast-Air are potentially huge as jet fuel is becoming increasingly expensive. The development of a hydro p fitted out with the new engines by up to 50%. Under any agreement Fast-Air and Hydro-Speed will each have a 50% intere The proposed investment was discussed at the last Board meeting of Fast -Air and the directors identified the following thre Subsidiary (incorporated) Associate (incorporated) Joint operation (unincorporated) The agreement with Hydro-Speed is due to be finalised by 31 December 20X7 and Hydro-Fast is due to commence manufa If the agreement results in an incorporated entity being established Hydro-Fast will sell all of the engines to Fast-Air and H in an unincorporated structure being established Hydro-Fast will distribute all of the engines to Fast-Air and Hydro-Speed acquired from Hydro-Fast during the 20X8 calendar year will have been sold by Fast-Air to external parties by 31 Decembe The directors of Fast-Air have asked for your advice as to which investment option is the most appropriate for Fast-Air. In o 1. Determine the likely impact of each of the three investment options on the balance sheet and income statement of Fast 2. Explain the likely impact of each of the three investment options on key financial ratios of Fast-Air. Information and worksheets attached to assist you with the above are as follows: Appendix 1 - Forecast financial information of Fast-Air for the year to 31 December 20X8 Appendix 2 - Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Appendix 3 - Consolidation worksheet - subsidiary option Appendix 4 - Consolidation worksheet - associate option Appendix 5 - Adjusted trial balance - joint operation option Appendix 6 - Summary financial statements - all 3 options Appendix 7 - Ratio analysis worksheet - all 3 options APPENDIX 1 Forecast financial information of Fast-Air for the year to 31 December 20X8 The following is the forecast financial information for the current Fast-Air group (parent + 2 wholly owned subsidiaries) for the year ended 31 December 20X8. (No adjusting consolidation, equity or joint operation entries have been made in respect of the investment in Hydro-Fast). Consolidated/ Joint operation Equity accounted $'000 $'000 Sales revenue 85,000 100,000 Cost of sales Other expenses 52,000 6,000 17,650 6,000 Profit after tax Retained earnings 1/1/X8 27,000 50,000 76,350 50,000 Retained earnings 31/12/X8 Share capital General reserve 77,000 60,000 7,500 126,350 60,000 7,500 Asset revaluation reserve Bank loan Current liabilities 10,000 65,000 30,000 10,000 65,000 30,000 Total equity and liabilities 249,500 298,850 Plant & equipment - WDV 95,000 95,000 Investment in Hydro-Fast/ Cash in Joint operation 60,000 60,000 Inventory 37,000 37,000 Cash Receivables 21,500 36,000 58,350 48,500 Total assets 249,500 298,850 The terms of the loan with the bank require a maximum debt ratio of 45%. Assume for the purposes of this analysis that there is no interest or tax expense. APPENDIX 2 Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Following is the forecast financial information for Hydro-Fast assuming it is an incorporated entity $'000 Sales revenue Cost of sales Profit before tax Share capital Non-current liabilities Current liabilities 98,700 70,500 28,200 120,000 50,000 17,000 Total equity and liabilities 215,200 Plant & equipment - WDV Inventory (incl. WIP) Cash Receivables Total assets 80,000 23,500 86,700 25,000 215,200 Following is the forecast financial information for Hydro-Fast assuming it is a joint operation $'000 Purchases Wages Less: closing WIP Cost of production distributed Plant & equipment Inventory (incl. WIP) Cash Non-current liabilities Current liabilities Net assets 57,500 16,500 -18,500 55,500 100,000 18,500 13,000 50,000 17,000 64,500 Ignore interest and income tax expenses in relation to Hydro-Fast Plant & equipment costing $100 million will be acquired on 1 January 20X8. This equipment will have a useful life of 5 years. All depreciation will be classified as an inventory production cost and has not yet been recognised in the figures above for Hydro-Fast as a joint operation. APPENDIX 3 SUBSIDIARY OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 and 2 has been recorded in the first two columns of the worksheet. - You now need to prepare the consolidation journals that will be required if Hydro-Fast is classified as a subsidiary. (Hint: there are four journals in total). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). Fast-Air + subs $'000 Hydro-Fast ADJUSTMENTS $'000 Sales revenue 85,000 98,700 Cost of sales 52,000 70,500 Other expenses 6,000 0 Profit after tax 27,000 28,200 Retained earnings 1/1/X8 50,000 0 Retained earnings 31/12/X8 77,000 28,200 Share capital 60,000 120,000 7,500 0 10,000 0 Net assets 154,500 148,200 Bank loan 65,000 50,000 Current liabilities 30,000 17,000 PPE 95,000 80,000 Investment in Hydro-Fast 60,000 0 Inventory 37,000 23,500 Cash 21,500 86,700 Receivables 36,000 25,000 Net assets 154,500 148,200 General Reserve ARR NCI Group Dr Cr $'000 $'000 $'000 NCI Parent Dr Cr $'000 $'000 $'000 APPENDIX 4 ASSOCIATE OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the equity journals that will be required if Hydro-Fast is classified as an associate subsidiary. (Hint: there is one journal only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). Fast-Air + subs Dr Cr $'000 $'000 $'000 Sales revenue 85,000 Cost of sales 52,000 Other expenses 6,000 Share of profit of associate Profit after tax 27,000 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 77,000 Share capital 60,000 General Reserve ARR 7,500 10,000 Net assets 154,500 Bank loan 65,000 Current liabilities 30,000 PPE 95,000 Investment in Hydro-Fast 60,000 Inventory 37,000 Cash 21,500 Receivables 36,000 Net assets 154,500 Group (including associate) $'000 APPENDIX 5 JO OPTION - Adjusted consolidated trial balance Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the year end adjusting JO journals that will be required if Hydro-Fast is classified as a joint operation. (Hint: there are two journals only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Fast-Air + subs Dr Cr $'000 $'000 $'000 Sales revenue 100,000 Cost of sales 17,650 Other expenses 6,000 Profit after tax 76,350 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 Share capital General Reserve ARR 126,350 60,000 7,500 10,000 Net assets 203,850 Bank loan 65,000 Current liabilities 30,000 PPE 95,000 Inventory 37,000 Cash (incl. cash in JO) 118,350 Receivables 48,500 Net assets 203,850 Group (including JO) $'000 APPENDIX 6 SUMMARY WORKSHEET Instructions: - Once Appendix 3 has been completed you need to take the figures in the LAST column of that worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). - Once Appendix 4 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). - Once Appendix 5 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Subsidiary $'000 Consolidated income statements Sales Expenses Share of profits of associate Net profit NCI share Parent share Consolidated balance sheets Current assets Cash Receivables Inventories Total current assets Non-current assets P&E Investment in associate Total non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholder's equity Share capital Reserves Retained earnings Total shareholder's equity attributable to parent NCI Total equity Associate $'000 JO $'000 APPENDIX 7 Ratio analysis worksheet Instructions: - Calculate the ratios for each option below * EBIT = Earnings before interest and tax # For inventory and receivables use the closing balance at the end of 20X8. Subsidiary Net Profit Net Profit ratio Sales revenue EBIT * Return on total assets Total assets Current assets Current ratio Current liabilities Total liabilities Debt ratio Total assets Owners Equity Equity ratio Total assets COGS Inventory turnover Inventory# Sales Accounts receivable turnover Receivables# Associate Joint operation ACCG926 - CORPORATE ACCOUNTIN SESSION 2 2015 TOPIC 10 - IN CLASS CASE STUDY You are a CPA working for Fast-Air Pty Limited (Fast-Air), a company involved in the design and construction of jet engine December financial year end. Fast-Air is currently involved in discussions with Hydro-Speed Pty Limited (Hydro-Speed), an entity involved in the design a a prototype of a hydro powered engine that can be adapted for use in aircraft. Fast-Air and Hydro-Speed are considering aim of this business will be to manufacture the new hydro powered engine that will be able to be used to power both ferries The benefits for Fast-Air are potentially huge as jet fuel is becoming increasingly expensive. The development of a hydro p fitted out with the new engines by up to 50%. Under any agreement Fast-Air and Hydro-Speed will each have a 50% intere The proposed investment was discussed at the last Board meeting of Fast -Air and the directors identified the following thre Subsidiary (incorporated) Associate (incorporated) Joint operation (unincorporated) The agreement with Hydro-Speed is due to be finalised by 31 December 20X7 and Hydro-Fast is due to commence manufa If the agreement results in an incorporated entity being established Hydro-Fast will sell all of the engines to Fast-Air and H in an unincorporated structure being established Hydro-Fast will distribute all of the engines to Fast-Air and Hydro-Speed acquired from Hydro-Fast during the 20X8 calendar year will have been sold by Fast-Air to external parties by 31 Decembe The directors of Fast-Air have asked for your advice as to which investment option is the most appropriate for Fast-Air. In o 1. Determine the likely impact of each of the three investment options on the balance sheet and income statement of Fast 2. Explain the likely impact of each of the three investment options on key financial ratios of Fast-Air. Information and worksheets attached to assist you with the above are as follows: Appendix 1 - Forecast financial information of Fast-Air for the year to 31 December 20X8 Appendix 2 - Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Appendix 3 - Consolidation worksheet - subsidiary option Appendix 4 - Consolidation worksheet - associate option Appendix 5 - Adjusted trial balance - joint operation option Appendix 6 - Summary financial statements - all 3 options Appendix 7 - Ratio analysis worksheet - all 3 options APPENDIX 1 Forecast financial information of Fast-Air for the year to 31 December 20X8 The following is the forecast financial information for the current Fast-Air group (parent + 2 wholly owned subsidiaries) for the year ended 31 December 20X8. (No adjusting consolidation, equity or joint operation entries have been made in respect of the investment in Hydro-Fast). Consolidated/ Joint operation Equity accounted $'000 $'000 Sales revenue 85,000 100,000 Cost of sales Other expenses 52,000 6,000 17,650 6,000 Profit after tax Retained earnings 1/1/X8 27,000 50,000 76,350 50,000 Retained earnings 31/12/X8 Share capital General reserve 77,000 60,000 7,500 126,350 60,000 7,500 Asset revaluation reserve Bank loan Current liabilities 10,000 65,000 30,000 10,000 65,000 30,000 Total equity and liabilities 249,500 298,850 Plant & equipment - WDV 95,000 95,000 Investment in Hydro-Fast/ Cash in Joint operation 60,000 60,000 Inventory 37,000 37,000 Cash Receivables 21,500 36,000 58,350 48,500 Total assets 249,500 298,850 The terms of the loan with the bank require a maximum debt ratio of 45%. Assume for the purposes of this analysis that there is no interest or tax expense. APPENDIX 2 Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Following is the forecast financial information for Hydro-Fast assuming it is an incorporated entity $'000 Sales revenue Cost of sales Profit before tax Share capital Non-current liabilities Current liabilities 98,700 70,500 28,200 120,000 50,000 17,000 Total equity and liabilities 215,200 Plant & equipment - WDV Inventory (incl. WIP) Cash Receivables Total assets 49350 14100 80,000 23,500 86,700 25,000 215,200 Following is the forecast financial information for Hydro-Fast assuming it is a joint operation $'000 Purchases Wages Less: closing WIP Cost of production distributed Plant & equipment Inventory (incl. WIP) Cash Non-current liabilities Current liabilities Net assets 57,500 16,500 -18,500 55,500 27750 100,000 50000 18,500 9250 13,000 Cash in Hand 50,000 25000 17,000 8500 53500 64,500 Ignore interest and income tax expenses in relation to Hydro-Fast Plant & equipment costing $100 million will be acquired on 1 January 20X8. This equipment will have a useful life of 5 years. All depreciation will be classified as an inventory production cost and has not yet been recognised in the figures above for Hydro-Fast as a joint operation. APPENDIX 3 SUBSIDIARY OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 and 2 has been recorded in the first two columns of the worksheet. - You now need to prepare the consolidation journals that will be required if Hydro-Fast is classified as a subsidiary. (Hint: there are four journals in total). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). Fast-Air + subs $'000 Hydro-Fast ADJUSTMENTS $'000 Sales revenue 85,000 98,700 Cost of sales 52,000 70,500 Other expenses 6,000 Profit after tax Group Dr Cr $'000 $'000 NCI $'000 Cr $'000 $'000 $'000 134,350 134,350 73,150 73,150 0 6,000 6,000 27,000 28,200 55,200 Retained earnings 1/1/X8 50,000 0 50,000 50,000 Retained earnings 31/12/X8 77,000 28,200 105,200 91,100 Share capital 60,000 120,000 7,500 0 10,000 0 Net assets 154,500 148,200 Bank loan 65,000 50,000 Current liabilities 30,000 17,000 PPE 95,000 80,000 Investment in Hydro-Fast 60,000 0 Inventory 37,000 23,500 Cash 21,500 86,700 Receivables 36,000 25,000 Net assets 154,500 148,200 General Reserve ARR NCI 49,350 Parent Dr 49,350 14,100 41,100 APPENDIX 4 ASSOCIATE OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the equity journals that will be required if Hydro-Fast is classified as an associate subsidiary. (Hint: there is one journal only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). Fast-Air + subs Dr Cr $'000 $'000 $'000 Group (including associate) $'000 Sales revenue 85,000 85,000 Cost of sales 52,000 52,000 6,000 6,000 Other expenses Share of profit of associate 14,100 Profit after tax 27,000 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 77,000 Share capital 60,000 General Reserve ARR 7,500 10,000 Net assets 154,500 Bank loan 65,000 Current liabilities 30,000 PPE 95,000 Investment in Hydro-Fast 60,000 Inventory 37,000 Cash 21,500 Receivables 36,000 Net assets 154,500 14,100 APPENDIX 5 JO OPTION - Adjusted consolidated trial balance Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the year end adjusting JO journals that will be required if Hydro-Fast is classified as a joint operation. (Hint: there are two journals only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Fast-Air + subs Dr Cr $'000 $'000 $'000 Sales revenue 100,000 Cost of sales 17,650 Other expenses 6,000 Profit after tax 76,350 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 Share capital General Reserve ARR Group (including JO) $'000 126,350 60,000 7,500 10,000 Net assets 203,850 Bank loan 65,000 25,000 90,000 Current liabilities 30,000 8,500 38,500 PPE 95,000 10,000 135,000 Inventory 37,000 53,500 64,850 Cash (incl. cash in JO) 118,350 Receivables 48,500 48,500 Net assets 203,850 168,600 APPENDIX 6 SUMMARY WORKSHEET which one is appropriate Instructions: - Once Appendix 3 has been completed you need to take the figures in the LAST column of that worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). - Once Appendix 4 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). - Once Appendix 5 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Subsidiary $'000 Associate $'000 JO $'000 Consolidated income statements Sales Expenses Share of profits of associate Net profit NCI share Parent share 134,350 79,150 0 55,200 14,100 41,100 85,000 58,000 14,100 41,100 0 41,100 100,000 58,900 0 41,100 0 41,100 108,200 61,000 60,500 229,700 21,500 36,000 37,000 94,500 64,850 48,500 48,750 162,100 175,000 0 175,000 404,700 95,000 74,100 169,100 263,600 135,000 0 135,000 297,100 47,000 115,000 162,000 242,700 30,000 65,000 95,000 168,600 38,500 90,000 128,500 168,600 242,700 168,600 168,600 Consolidated balance sheets Current assets Cash Receivables Inventories Total current assets Non-current assets P&E Investment in associate Total non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholder's equity Share capital Reserves Retained earnings Total shareholder's equity attributable to parent NCI Total equity Compare between 3 APPENDIX 7 Ratio analysis worksheet Instructions: - Calculate the ratios for each option below * EBIT = Earnings before interest and tax # For inventory and receivables use the closing balance at the end of 20X8. Net Profit ratio Return on total assets Current ratio Debt ratio Equity ratio Inventory turnover Accounts receivable turnover Subsidiary Associate Joint operation Net Profit 55,200 41,100 41,100 Sales revenue 134,350 85,000 10,000 EBIT * 55,200 41,100 41,100 Total assets 404,700 263,600 297,100 Current assets 229,700 94,500 162,100 Current liabilities 47,000 30,000 38,500 Total liabilities 162,000 95,000 128,500 Total assets 404,700 263,600 297,100 40.03% 36.04% 43.25% Owners Equity 242,700 168,600 168,600 Total assets 404,700 263,600 297,100 59.98% 63.97% COGS 73,150 52,000 52,900 Inventory# 60,500 37,000 48,750 1.2 1.4 1.1 Sales 134,350 85,000 100,000 Receivables# 61,000 36,000 48,500 2.2 2.4 2.1 ACCG926 - CORPORATE ACCOUNTIN SESSION 2 2015 TOPIC 10 - IN CLASS CASE STUDY You are a CPA working for Fast-Air Pty Limited (Fast-Air), a company involved in the design and construction of jet engine December financial year end. Fast-Air is currently involved in discussions with Hydro-Speed Pty Limited (Hydro-Speed), an entity involved in the design a a prototype of a hydro powered engine that can be adapted for use in aircraft. Fast-Air and Hydro-Speed are considering aim of this business will be to manufacture the new hydro powered engine that will be able to be used to power both ferries The benefits for Fast-Air are potentially huge as jet fuel is becoming increasingly expensive. The development of a hydro p fitted out with the new engines by up to 50%. Under any agreement Fast-Air and Hydro-Speed will each have a 50% intere The proposed investment was discussed at the last Board meeting of Fast -Air and the directors identified the following thre Subsidiary (incorporated) Associate (incorporated) Joint operation (unincorporated) The agreement with Hydro-Speed is due to be finalised by 31 December 20X7 and Hydro-Fast is due to commence manufa If the agreement results in an incorporated entity being established Hydro-Fast will sell all of the engines to Fast-Air and H in an unincorporated structure being established Hydro-Fast will distribute all of the engines to Fast-Air and Hydro-Speed acquired from Hydro-Fast during the 20X8 calendar year will have been sold by Fast-Air to external parties by 31 Decembe The directors of Fast-Air have asked for your advice as to which investment option is the most appropriate for Fast-Air. In o 1. Determine the likely impact of each of the three investment options on the balance sheet and income statement of Fast 2. Explain the likely impact of each of the three investment options on key financial ratios of Fast-Air. Information and worksheets attached to assist you with the above are as follows: Appendix 1 - Forecast financial information of Fast-Air for the year to 31 December 20X8 Appendix 2 - Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Appendix 3 - Consolidation worksheet - subsidiary option Appendix 4 - Consolidation worksheet - associate option Appendix 5 - Adjusted trial balance - joint operation option Appendix 6 - Summary financial statements - all 3 options Appendix 7 - Ratio analysis worksheet - all 3 options APPENDIX 1 Forecast financial information of Fast-Air for the year to 31 December 20X8 The following is the forecast financial information for the current Fast-Air group (parent + 2 wholly owned subsidiaries) for the year ended 31 December 20X8. (No adjusting consolidation, equity or joint operation entries have been made in respect of the investment in Hydro-Fast). Consolidated/ Joint operation Equity accounted $'000 $'000 Sales revenue 85,000 100,000 Cost of sales Other expenses 52,000 6,000 17,650 6,000 Profit after tax Retained earnings 1/1/X8 27,000 50,000 76,350 50,000 Retained earnings 31/12/X8 Share capital General reserve 77,000 60,000 7,500 126,350 60,000 7,500 Asset revaluation reserve Bank loan Current liabilities 10,000 65,000 30,000 10,000 65,000 30,000 Total equity and liabilities 249,500 298,850 Plant & equipment - WDV 95,000 95,000 Investment in Hydro-Fast/ Cash in Joint operation 60,000 60,000 Inventory 37,000 37,000 Cash Receivables 21,500 36,000 58,350 48,500 Total assets 249,500 298,850 The terms of the loan with the bank require a maximum debt ratio of 45%. Assume for the purposes of this analysis that there is no interest or tax expense. APPENDIX 2 Budget of the first year of operations of Hydro-Fast and other additional relevant financial information Following is the forecast financial information for Hydro-Fast assuming it is an incorporated entity $'000 Sales revenue Cost of sales Profit before tax Share capital Non-current liabilities Current liabilities 98,700 70,500 28,200 120,000 50,000 17,000 Total equity and liabilities 215,200 Plant & equipment - WDV Inventory (incl. WIP) Cash Receivables Total assets 49350 14100 80,000 23,500 86,700 25,000 215,200 Following is the forecast financial information for Hydro-Fast assuming it is a joint operation $'000 Purchases Wages Less: closing WIP Cost of production distributed Plant & equipment Inventory (incl. WIP) Cash Non-current liabilities Current liabilities Net assets 57,500 16,500 -18,500 55,500 27750 100,000 50000 18,500 9250 13,000 Cash in Hand 50,000 25000 17,000 8500 53500 64,500 Ignore interest and income tax expenses in relation to Hydro-Fast Plant & equipment costing $100 million will be acquired on 1 January 20X8. This equipment will have a useful life of 5 years. All depreciation will be classified as an inventory production cost and has not yet been recognised in the figures above for Hydro-Fast as a joint operation. APPENDIX 3 SUBSIDIARY OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 and 2 has been recorded in the first two columns of the worksheet. - You now need to prepare the consolidation journals that will be required if Hydro-Fast is classified as a subsidiary. (Hint: there are four journals in total). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). Fast-Air + subs $'000 Hydro-Fast ADJUSTMENTS $'000 Sales revenue 85,000 98,700 Cost of sales 52,000 70,500 Other expenses 6,000 Profit after tax Group Dr Cr $'000 $'000 NCI $'000 Cr $'000 $'000 $'000 134,350 134,350 73,150 73,150 0 6,000 6,000 27,000 28,200 55,200 Retained earnings 1/1/X8 50,000 0 50,000 50,000 Retained earnings 31/12/X8 77,000 28,200 105,200 91,100 Share capital 60,000 120,000 7,500 0 10,000 0 Net assets 154,500 148,200 Bank loan 65,000 50,000 Current liabilities 30,000 17,000 PPE 95,000 80,000 Investment in Hydro-Fast 60,000 0 Inventory 37,000 23,500 Cash 21,500 86,700 Receivables 36,000 25,000 Net assets 154,500 148,200 General Reserve ARR NCI 49,350 Parent Dr 49,350 14,100 41,100 APPENDIX 4 ASSOCIATE OPTION - Consolidation worksheet Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the equity journals that will be required if Hydro-Fast is classified as an associate subsidiary. (Hint: there is one journal only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). Fast-Air + subs Dr Cr $'000 $'000 $'000 Group (including associate) $'000 Sales revenue 85,000 85,000 Cost of sales 52,000 52,000 6,000 6,000 Other expenses Share of profit of associate 14,100 Profit after tax 27,000 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 77,000 Share capital 60,000 General Reserve ARR 7,500 10,000 Net assets 154,500 Bank loan 65,000 Current liabilities 30,000 PPE 95,000 Investment in Hydro-Fast 60,000 Inventory 37,000 Cash 21,500 Receivables 36,000 Net assets 154,500 14,100 APPENDIX 5 JO OPTION - Adjusted consolidated trial balance Instructions: - Information from Appendix 1 has been recorded in the first column of the worksheet. - You now need to prepare the year end adjusting JO journals that will be required if Hydro-Fast is classified as a joint operation. (Hint: there are two journals only). - You also need to post the journals into this worksheet and complete the worksheet. - Once the worksheet has been completed you need to take the figures in the LAST column of this worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Fast-Air + subs Dr Cr $'000 $'000 $'000 Sales revenue 100,000 Cost of sales 17,650 Other expenses 6,000 Profit after tax 76,350 Retained earnings 1/1/X8 50,000 Retained earnings 31/12/X8 Share capital General Reserve ARR Group (including JO) $'000 126,350 60,000 7,500 10,000 Net assets 203,850 Bank loan 65,000 25,000 90,000 Current liabilities 30,000 8,500 38,500 PPE 95,000 10,000 135,000 Inventory 37,000 53,500 64,850 Cash (incl. cash in JO) 118,350 Receivables 48,500 48,500 Net assets 203,850 168,600 APPENDIX 6 SUMMARY WORKSHEET which one is appropriate Instructions: - Once Appendix 3 has been completed you need to take the figures in the LAST column of that worksheet (column I) and enter them into the FIRST column of Appendix 6 (column B). - Once Appendix 4 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the SECOND column of Appendix 6 (column C). - Once Appendix 5 has been completed you need to take the figures in the LAST column of that worksheet (column E) and enter them into the THIRD column of Appendix 6 (column D). Subsidiary $'000 Associate $'000 JO $'000 Consolidated income statements Sales Expenses Share of profits of associate Net profit NCI share Parent share 134,350 79,150 0 55,200 14,100 41,100 85,000 58,000 14,100 41,100 0 41,100 100,000 58,900 0 41,100 0 41,100 108,200 61,000 60,500 229,700 21,500 36,000 37,000 94,500 64,850 48,500 48,750 162,100 175,000 0 175,000 404,700 95,000 74,100 169,100 263,600 135,000 0 135,000 297,100 47,000 115,000 162,000 242,700 30,000 65,000 95,000 168,600 38,500 90,000 128,500 168,600 242,700 168,600 168,600 Consolidated balance sheets Current assets Cash Receivables Inventories Total current assets Non-current assets P&E Investment in associate Total non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholder's equity Share capital Reserves Retained earnings Total shareholder's equity attributable to parent NCI Total equity Compare between 3 APPENDIX 7 Ratio analysis worksheet Instructions: - Calculate the ratios for each option below * EBIT = Earnings before interest and tax # For inventory and receivables use the closing balance at the end of 20X8. Net Profit ratio Return on total assets Current ratio Debt ratio Equity ratio Inventory turnover Accounts receivable turnover Subsidiary Associate Joint operation Net Profit 55,200 41,100 41,100 Sales revenue 134,350 85,000 10,000 EBIT * 55,200 41,100 41,100 Total assets 404,700 263,600 297,100 Current assets 229,700 94,500 162,100 Current liabilities 47,000 30,000 38,500 Total liabilities 162,000 95,000 128,500 Total assets 404,700 263,600 297,100 40.03% 36.04% 43.25% Owners Equity 242,700 168,600 168,600 Total assets 404,700 263,600 297,100 59.98% 63.97% COGS 73,150 52,000 52,900 Inventory# 60,500 37,000 48,750 1.2 1.4 1.1 Sales 134,350 85,000 100,000 Receivables# 61,000 36,000 48,500 2.2 2.4 2.1