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On 1 July 2 0 1 9 , Naomi Ltd acquired all the issued shares of Ashley Ltd . The recorded equity of Ashley Ltd
On July Naomi Ltd acquired all the issued shares of Ashley Ltd The recorded equity of Ashley Ltd at this date consisted of: Share capital $ General reserve Retained earnings At July all the identifiable assets and liabilities of Ashley Ltd were recorded at fair value except for the following assets: Carrying amount Fair value Land $ $ Inventories Machinery cost $ Vehicles cost $ At July Ashley Ltd owned but had not recorded an internally generated brand name. This brand name was considered by Naomi Ltd to have a fair value of $ and an indefinite useful life. An impairment test conducted with respect to the brand name on June concluded that its recoverable amount at that date was $ less than its carrying amount. The vehicles and machinery were expected to have a further useful life of and years respectively, with benefits to be received evenly over those periods. Inventories on hand at July were all sold by January The land owned at July was sold in September for $ The machinery on hand at July was sold on January for $ Adjustments for the differences between carrying amounts and fair values of assets and liabilities on hand at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related valuation reserves are transferred to retained earnings. KINGS OWN INSTITUTE Success in Higher Education ACC CORPORATE ACCOUNTING AND REPORTING T Page of AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD ABN: CRICOS A The trial balances of both companies at June showed the following balances: Debit balances Naomi Ltd Ashley Ltd Cash $ $ Receivables Inventories Other current assets Deferred tax assets Vehicles Equipment Land Financial assets Intangible assets Shares in Ashley Ltd Debentures in Naomi Ltd Dividend paid Dividend declared Transfer to general reserve Cost of sales Income tax expense Depreciation and other expenses Carrying amount of machinery sold Carrying amount of equipment sold $ $ Credit balances Share capital $ $ General reserve Retained earnings Accounts payable Loan payable due Dividend payable Provisions Current tax liability Deferred tax liability Accumulated depreciation vehicles Accumulated depreciation equipment Debentures mature Sales revenue Dividend revenue Other income Proceeds on sale of equipment Proceeds on sale of machinery $ $ KINGS OWN INSTITUTE Success in Higher Education ACC CORPORATE ACCOUNTING AND REPORTING T Page of AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD ABN: CRICOS A Additional information a On January Naomi Ltd sold an item of equipment to Ashley Ltd for $ The equipment had a carrying amount at the date of sale of $ Both companies depreciate equipment at pa on a straightline basis. b On May Ashley Ltd sold a machine to Naomi Ltd for $ The machine had a carrying amount of $ at the date of sale. Naomi Ltd recorded the machine as inventories. In November the item was sold to an external party for $ c On July Naomi Ltd issued $ debentures to Ashley Ltd with interest at pa paid on June and December each year. The debentures are due for redemption on June d During the financial year, Naomi Ltd sold inventories to Ashley Ltd for $ The cost of these inventories to Naomi Ltd was $ Of these inventories, are still on hand at June e During the financial year, Ashley Ltd paid an interim dividend of $ to Naomi Ltd and declared a further dividend of $ that has not been paid by year end. f The transfer to general reserve recorded by Ashley Ltd in the current year was from retained earnings earned after July g The tax rate is Submission requirements details: Required Prepare the consolidation worksheet of the Naomi Ltd group for June Show all workings. Calculate acquisition analysis as at July Prepare the consolidation journal entries for June Complete the consolidated worksheet for June Prepare the consolidated financial statement at June
On July Naomi Ltd acquired all the issued shares of Ashley Ltd The recorded equity of Ashley Ltd
at this date consisted of:
Share capital $
General reserve
Retained earnings
At July all the identifiable assets and liabilities of Ashley Ltd were recorded at fair value except for
the following assets:
Carrying amount Fair value
Land $ $
Inventories
Machinery cost $
Vehicles cost $
At July Ashley Ltd owned but had not recorded an internally generated brand name. This brand
name was considered by Naomi Ltd to have a fair value of $ and an indefinite useful life. An
impairment test conducted with respect to the brand name on June concluded that its recoverable
amount at that date was $ less than its carrying amount.
The vehicles and machinery were expected to have a further useful life of and years respectively, with
benefits to be received evenly over those periods. Inventories on hand at July were all sold by
January The land owned at July was sold in September for $ The machinery
on hand at July was sold on January for $
Adjustments for the differences between carrying amounts and fair values of assets and liabilities on hand
at acquisition date are recognised on consolidation. When assets are sold or derecognised, any related
valuation reserves are transferred to retained earnings.
KINGS OWN INSTITUTE
Success in Higher Education
ACC CORPORATE ACCOUNTING AND REPORTING T Page of
AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD ABN: CRICOS A
The trial balances of both companies at June showed the following balances:
Debit balances Naomi Ltd Ashley Ltd
Cash $ $
Receivables
Inventories
Other current assets
Deferred tax assets
Vehicles
Equipment
Land
Financial assets
Intangible assets
Shares in Ashley Ltd
Debentures in Naomi Ltd
Dividend paid
Dividend declared
Transfer to general reserve
Cost of sales
Income tax expense
Depreciation and other expenses
Carrying amount of machinery sold
Carrying amount of equipment sold
$ $
Credit balances
Share capital $ $
General reserve
Retained earnings
Accounts payable
Loan payable due
Dividend payable
Provisions
Current tax liability
Deferred tax liability
Accumulated depreciation vehicles
Accumulated depreciation equipment
Debentures mature
Sales revenue
Dividend revenue
Other income
Proceeds on sale of equipment
Proceeds on sale of machinery
$ $
KINGS OWN INSTITUTE
Success in Higher Education
ACC CORPORATE ACCOUNTING AND REPORTING T Page of
AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD ABN: CRICOS A
Additional information
a On January Naomi Ltd sold an item of equipment to Ashley Ltd for $ The equipment
had a carrying amount at the date of sale of $ Both companies depreciate equipment at pa
on a straightline basis.
b On May Ashley Ltd sold a machine to Naomi Ltd for $ The machine had a carrying
amount of $ at the date of sale. Naomi Ltd recorded the machine as inventories. In November
the item was sold to an external party for $
c On July Naomi Ltd issued $ debentures to Ashley Ltd with interest at pa paid on
June and December each year. The debentures are due for redemption on June
d During the financial year, Naomi Ltd sold inventories to Ashley Ltd for $ The cost of
these inventories to Naomi Ltd was $ Of these inventories, are still on hand at June
e During the financial year, Ashley Ltd paid an interim dividend of $ to Naomi Ltd and
declared a further dividend of $ that has not been paid by year end.
f The transfer to general reserve recorded by Ashley Ltd in the current year was from retained earnings
earned after July
g The tax rate is
Submission requirements details:
Required
Prepare the consolidation worksheet of the Naomi Ltd group for June Show all workings.
Calculate acquisition analysis as at July
Prepare the consolidation journal entries for June
Complete the consolidated worksheet for June
Prepare the consolidated financial statement at June
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