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AYN417 CORPORATE ACCOUNTING REVIEW LECTURE A. CONSOLIDATION REVIEW QUESTION On 1 July 2014, Hackett Led acquired 75% of the share capital of Thorpe Ltd for $600,000. At this date, the financial statements of Thorpe Ltd included the following items: S Retained Earnings 150,000 Share Capital 350,000 General Reserve 50,000 At 1 July 2014 all of the identifiable net assets of Thorpe Ltd were recorded at fair value except for the following assets: Carrying amount Fair value S $ Inventory 100,000 130,000 Plant (cost $350,000) 200,000 240,000 Land 400,000 600,000 Adjustments for differences between carrying amounts and fair values of assets at acquisition date are made on consolidation. During the year ended 30 June 2015, all inventory on hand at 1 July 2014 was sold. Plant had a further five-year life, with benefits expected to be received evenly over that time. Land on hand at 1 July 2014 was sold on 1 May 2016 for $650,000. Additional information: (1) The value of the inventory of Hackett Ltd at 1 July 2015 included an intragroup profit of $30,000 as a result of purchases from Thorpe Ltd. It was all sold by Hackett Ltd during the year ended 30 June 2016. (ii) During the year ended 30 June 2016, Thorpe Ltd sold inventory to Hackett Ltd for $180,000 (cost price $135,000). At 30 June 2016, 20% of these inventory items were still held by Hackett Ltd. (iii) On 1 July 2015, Thorpe Led sold an item of plant and machinery (original cost $120,000 and accumulated depreciation $90,000) to Hackett Ltd for $45,000. The depreciation rate used by Hackett Lid for this item of plant and machinery is 10% per annum on cost.(iv) Extracts from the financial statements of Hackett Lid and Thorpe Ltd at 30 June 2016 were as follows: Hackett Ltd Thorpe Ltd S S Profit for the period 90,000 300,000 Retained earnings (1/7/15) 225,000 220,000 315,000 520,000 Transfer from general reserve 15,000 Interim dividend paid (45,000) (60,000) Dividend declared (30,000) (45,000) (75,000) (90,000] Retained earnings (30/6/16) 240,000 430,000 Share capital 900,000 350,000 General reserve 225,000 80,000 Dividend payable 30,000 45,000 Loan to Thorpe Ltd 20,000 Loans payable 150,000 (V) On 2 January 2016, Hackett Ltd loaned money to Thorpe Ltd at 15% interest. Interest is paid half-yearly on 1 July and 1 January. (vi) On 1 April 2016, Hackett Ltd paid Thorpe Lid $20,000 for rent of office space from 1 January 2016 to 30 June 2016. (vii) The income tax rate is 30%. (viil) Hackett Ltd uses the partial goodwill method. Required: Prepare the consolidation worksheet general journal entries and complete the partial consolidation worksheet on the following page for the preparation of the consolidated financial statements of Hackett Ltd at 30 June 2016.Financial Hackett Thorpe Parent Statements Ltd Ltd Profit for the 90,000 300,000 period Retained 225,000 220,000 earnings (1/7/15) 315,000 520,000 Transfer from BCVR Transfer from 15,000 general reserve Interim 15.007 60,000 dividend paid Dividend 30,000 45,000 declared Retained 240,000 430,000 earnings (30/6/16) Share Capital 900,000 350,000 General 225,000 80,000 Reserve BCVR 0 0 Total equity: parent Total equity: NO Total equity 1,365,000 860,000 Dividend 30,000 45,000 Payable Loan to 20,000 Thorpe Loan payable 150,000