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i need answer to the consolidation question.here is the question. home / study / business / accounting / accounting questions and answers / topic 2:

i need answer to the consolidation question.here is the question.

home / study / business / accounting / accounting questions and answers / topic 2: consolidation: intra-group transactions on 1 july 2016, pandora ltd acquired all the ...

Question: Topic 2: Consolidation: Intra-group transactions On 1 July 2016, Pandora Ltd acquired all the iss...

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Topic 2: Consolidation: Intra-group transactions

On 1 July 2016, Pandora Ltd acquired all the issued shares of Sebastian Ltd. Pandora Ltd paid $30,000 in cash and 20,000 shares in Pandora Ltd valued at $3 per share. At this date, the equity of Sebastian Ltd consisted of $66,000 share capital and $6,000 retained earnings.

At 1 July 2016, all the identifiable assets and liabilities of Sebastian Ltd were recorded at amounts equal to their fair values except for:

image text in transcribed

The plant was considered to have a further 5-year life. The patents were sold for $120,000 to an external entity on 18 August 2016. The inventory was all sold by 30 June 2017.

Additional information:

(a) Pandora Ltd sells certain raw materials to Sebastian Ltd to be used in its manufacturing process. At 1 July 2017, Sebastian Ltd held inventory sold to it by Pandora Ltd in the previous year at a profit of $600. During the 2017/2018 year, Pandora Ltd sold inventory to Sebastian Ltd for $21,000. None of this was on hand at 30 June 2018.

(b) Sebastian Ltd also sells items of inventory to Pandora Ltd. During the 2017/2018 year, Sebastian Ltd sold goods to Pandora Ltd for $4,500. At 30 June 2018, inventory which had been sold to Pandora Ltd at a profit of $300 was still on hand in Pandora Ltds inventory.

(c) On 1 July 2017, Sebastian Ltd sold an item of plant to Pandora Ltd for $15,000. This plant had a carrying amount in the records of Sebastian Ltd of $14,000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.

(d) On 1 January 2017, Pandora Ltd sold an item of inventory to Sebastian Ltd for $18,000. The inventory had cost Pandora Ltd $16,000. This item was classified by Sebastian Ltd as plant. Plant of this type is depreciated by Sebastian Ltd at 20% p.a.

(e) On 1 March 2018, Sebastian Ltd sold an item of plant to Pandora Ltd. Whereas Sebastian Ltd classified this as plant, Pandora Ltd classified it as inventory. The sales price was $9,000 which included a profit to Sebastian Ltd of $1,500. Pandora Ltd sold this to another entity on 31 March 2018 for $9,900.

(f) The tax rate is 30%.

At 30 June 2018, the following financial information was provided by the two companies:

Pandora Ltd

Sebastian Ltd

Dr ($)

Cr ($)

Dr ($)

Cr ($)

Sales revenue

64,500

78,000

Cost of sales

30,900

46,350

Trading expenses

4,800

9,000

Office expenses

7,950

4,050

Depreciation expenses

1,800

3,900

Proceeds on sale of plant

9,000

15,000

Carrying amount of plant sold

7,500

14,000

Income tax expense

11,100

7,300

Share capital

96,000

66,000

Retained earnings (1/7/17)

48,000

31,500

Current liabilities

21,100

10,500

Deferred tax liability

11,000

15,000

Plant

57,000

107,250

Accumulated depreciation plant

18,300

33,450

Intangibles

12,000

11,100

Deferred tax assets

8,100

9,450

Shares in Sebastian Ltd

90,000

0

Inventories

28,500

24,600

Receivables

8,250

12,450

267,900

267,900

249,450

249,450

Required:

1. Prepare the acquisition analysis at 1 July 2017.

2. Prepare the consolidation worksheet entries for Patience Ltds group at 1 July 2017.

Question 1

Max. marks allocated

Acquisition analysis (Part 1)

5

Consolidation worksheet entries (Part 2)

14

Presentation

1

Total

20

Show transcribed image text

Fair value $123000 105000 22500 Carrying amount Plant (cost $150000) Patents Inventories $120000 90000 18000

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