Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On 1 July 2019, ABC Pty Ltd acquired all the share capital of Ten Pty Ltd for $750,000. At that date, Ten Pty Ltd's equity

On 1 July 2019, ABC Pty Ltd acquired all the share capital of Ten Pty Ltd for $750,000. At that date, Ten Pty Ltd's equity consisted of: Share capital $200,000, General Reserve $182,000 and Retained earnings $114,000.

At 1 July 2019, all the identifiable assets and liabilities of Ten Pty Ltd were recorded at fair value. Both companies employ the perpetual inventory system.

Financial information for ABC and Ten Pty Ltd for the year ended 30 June 2020 is presented below:

Financial statements ABC Pty Ltd Ten Pty Ltd
Sales revenue 2,392,000 1,856,000
Cost of sales 1,776,000 1,340,000
Wages and salaries 115,000 124,000
Depreciation 10,400 9,600
Other expenses 8,000 -
Total expenses 1,909,400 1,473,600
482,600 382,400
Proceeds from sale of equipment 12,000 -
Carrying amount of equipment sold 14,000 -
Gain(loss) -2,000 -
Profit before income tax 480,600 382,400
Income tax expense 192,240 176,960
Profit 288,360 205,440
Retained earnings (1/7/2020) 201,640 80,560
490,000 286,000
Dividend paid 100,000 -
Retained earnings (30/6/2021) 390,000 286,000
Share capital 1,000,000 600,000
General reserve 280,000 192,000
Deferred tax liability 104,000 86,000
1,774,000 1,164,000
Investment in subsidiary Ltd 750,000 -
Cash 160,000 86,000
Inventory 336,000 72,000
Other current assets 50,000 736,000
Land 200,000 240,000
Equipment 104,000 56,000
Accumulated depreciation -20,000 -26,000
1,580,000 1,164,000

Additional information:

  1. On 1 January 2021, Ten Pty Ltd sold inventory costing $60,000 to ABC Pty Ltd for $100,000. Half of this inventory was still on hand with ABC Pty Ltd at 30 June 2021.
  2. On 31 March 2021, ABC Pty Ltd sold equipment to Ten Pty Ltd for $12,000 which was $2,000 below its carrying amount to ABC Pty Ltd at that date. Ten Pty Ltd charged deprecation at the rate of 10% p.a. on this time.
  3. In the 2021 period, ABC Pty Ltd sold a block of land to Ten Pty Ltd at $40,000 above cost. The land is still held by Ten Pty Ltd.
  4. There was a profit in the beginning inventory of ABC Pty Ltd of $12,000 on goods acquired from Ten Pty Ltd in the previous period.
  5. The tax is 30 per cent.

Required:

  1. Calculate goodwill on the date of acquisition;
  2. Prepare journal entries for consolidation worksheet;
  3. Prepare consolidation worksheet for ABC Pty Ltd for the year ended 30 June 2020.
  4. Prepare consolidated financial statements for the year ended 30 June 2020.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bucks The Next Step Advanced Medical Coding And Auditing

Authors: Elsevier

1st Edition

0323874118, 978-0323874113

More Books

Students also viewed these Accounting questions