Question
On 1 July 2017 South Ltd acquired all the share capital of West Ltd for $160,000. At that date the accounts of West Ltd show
On 1 July 2017 South Ltd acquired all the share capital of West Ltd for $160,000. At that date the accounts of West Ltd show the following:
Share capital
$100,000
General reserve
30,000
Retained earnings
20,000
Additional information for the year ended 30 June 2017
1. Sales by West Ltd to South Ltd during the year amounted to $ 110,000.
2. Unrealised profit in inventory of South Ltd:
01/07/2016$5,000
30/06/2017$3,000
3. On 1 January 2010 South Ltd sold an item of plant to West Ltd for $45,000, making a profit on the sale of $10,000. West Ltd depreciates plant at 20% per annum on cost.
4. Included in the other assets of South Ltd is a three-year loan of $20,000 at 15% per annum to West Ltd made on 1 April 2017. Three months interest was accrued by both companies at 30 June 2016.
5. Goodwill is tested annually for impairment; goodwill has been impaired by:
$1,000 for the year ended 30 June 2016; and
$2,000 for the year ended 30 June 2017.
Task 7
a.Complete the consolidation worksheet.
Consolidation Worksheet
South Ltd
West Ltd
Eliminations
Consolidated
30 June 2017
Dr
Cr
Statements
Sales
900,000
500,000
110,000
=900,000+500,000-110,000=1,290,000
Inventory 01/07/2016
70,000
60,000
5,000
125,000
Purchases
510,000
400,000
110,000
800,000
580,000
460,000
Inventory 30/06/2017
90,000
80,000
3000
=90000+80000-3000=167,000
Less Cost of Goods Sold
490,000
380,000
Gross Profit
410,000
120,000
Expenses
210,000
40,000
200,000
80,000
Add Other Income
Profit on Sale of Plant
10,000
0
Interest Income
750
0
Dividends from West Ltd
30,000
0
Profit before Tax
240,750
80,000
Less Income Tax expense
90,000
30,000
Profit
150,750
50,000
Retained Earnings 01/07/2016
80,000
40,000
Available
230,750
90,000
Appropriations:
Dividend - Paid
40,000
30,000
Dividend - Declared
50,000
20,000
Total Appropriations
90,000
50,000
Retained Earnings 30/06/2017
140,750
40,000
General Reserve
100,000
50,000
Share Capital
200,000
100,000
Dividend Payable
50,000
20,000
Other Current Liabilities
110,000
60,000
Non-Current Liabilities
60,000
20,000
660,750
290,000
Shares in West Ltd
160,000
0
Plant and Equipment (net)
260,000
120,000
Inventory
90,000
80,000
Other Assets
150,750
90,000
Goodwill on Consolidation
0
Accum Impairment - Goodwill
660,750
290,000
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
15th Edition
978-0256168723, 77388720, 256168725, 9780077388720, 978-007337960
