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PART B (60 Marks) Parent Ltd acquired 100% interest in Subsidiary Ltd on 1 January 2019. At that date, Subsidiary Ltd's net assets were represented

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PART B (60 Marks) Parent Ltd acquired 100% interest in Subsidiary Ltd on 1 January 2019. At that date, Subsidiary Ltd's net assets were represented by its shareholders' equity consisting of share capital of $100,000 and retained earnings of $70,000. On the date of the acquisition, Parent Ltd and Subsidiary Ltd agreed the following (a) Subsidiary's Land had a fair value of $180,000 (carrying amount $100,000). (b) Subsidiary had a patent with a fair value of $100,000 (was not previously recognised in Subsidiary's book). The patent is to amortise over 10 years on straight line basis. (c) Subsidiary had inventories that were $30,000 lower than fair value. These inventories were sold by 30 June 2019. The following intra-company transactions occurred during the year ending 30 June 2020. a) On 1 May 2020, Subsidiary Ltd purchased goods for $150,000 from Parent Ltd on credit at cost plus 50% mark up. As at 30 June 2020, 40% of the inventory was still on hand and 25% of the amount owing for the sales remain unpaid. b) On 1 June 2019, Parent Ltd sold inventory to Subsidiary Ltd for $85,000, recording a before-tax profit of $30,000. By 30 June 2019, Subsidiary Ltd has sold one-third of these to other entities making profits of $54,000 and the remaining inventory was sold by 30 June 2020 for $132,000 to external parties. c) On 1 December 2019, Parent Ltd sold an item of machinery for $104,000 to Subsidiary Ltd. At the date of sale, Parent Ltd had recorded the asset at a carrying amount of $80,000 (accumulated depreciation: $20,000. depreciation rate: 10% p.a. straight-line method). d) Parent Ltd provided a warehouse to Subsidiary Ltd since 1 March 2019. The rent is $12,000 per annum and payable in arrears 6 monthly on 31 August and 28 February each year. Both companies record accruals. Required A Prepare the following a) Acquisition analysis at 1 January 2019 (5 marks) b) A consolidation worksheet for the year ending 30 June 2020 (use the template provided, add more lines if necessary: show all workings. You do not need to submit the journal entries as these entries will not be marked) (51 marks) c) A consolidated Statement of Changes in Equity for the year ending 30 June 2020 (4 marks) "livate x] wa (b) Consolidation Worksheet Parent Ltd Subsidiary Ltd Adjustments Dr Consolidated Sales 1,050,000 509,100 Less Cost of Sales 281,000 Gross Profit Add Dividend Income Add Rental Income Add Gain on Sale of Machine (Proceeds Less Occupancy Expenses including Rent Less Admin Expenses Less Depreciation & Amortisation Less Other Expenses Profit before tax 510,000 500,000 35,000 12,000 24,000 37,000 46,000 62,000 40,000 426,000 228, 100 0 0 0 29,500 15,000 40,000 10,000 133,600 Less Income Tax Expenses 80,000 24,600 Profit after tax 346,000 109,000 Retained earnings (1 July 2019) 124,000 90,000 Less Dividends (paid and declared) Retained earnings (30 June 2020) General reserve Share Capital (20,000) 400,000 36,000 400,000 (35,000) 164,000 0 100,000 BCVR o 0 Deferred tax liabilities 0 0 80,000 Trade & Other Payables Dividend payable Bank Overdraft Total Shareholders' equity and Liabilities Land Machinery, at cost Less Accumulated Depreciation Patent at cost Less Accumulated Amortisation Investment in Subsidiary Ltd Goodwill Dividend receivable 70,000 90.000 1,076,000 142.000 370,000 (120,000 40,000 0 340,000 0 20,000 75,000 20,000 0 359,000 100,000 135,000 (55,000) D 0 D 15,000 0 w 1 Normal 1 Body Text 1 No Spac... 1 Table Pa... 1 Heading 1 Headin Styles Paragraph Less Dividends (paid and dedared) Retained earnings (30 June 2020) General reserve Share Capital (70,000) 400,000 36,000 400,000 (35,000) 164,000 100,000 BCVR 0 0 Deferred tax liabilities 0 0 80,000 75,000 Trade & Other Payables Dividend payable Bank Overdraft Total Shareholders' equity and Liabilities Land Machinery, at cost Less Accumulated Depreciation Patent at cost Less Accumulated Amortisation Investment in Subsidiary Ltd Goodwill Dividend receivable 70,000 90,000 1,076,000 142,000 370,000 (120,000) 40,000 0 340,000 0 20,000 20,000 0 359,000 100,000 135,000 (55,000) 0 0 0 15,000 0 Deferred tax assets 0 0 60,000 79,000 Inventories 169,000 Trade & Other Receivables 95,000 Cash and cash equivalent 20,000 Total Assets 1,076,000 ACCT6005 Assessment 2 Case Study Brief.docx 25,000 359,000 Page 5 of 6 PART B (60 Marks) Parent Ltd acquired 100% interest in Subsidiary Ltd on 1 January 2019. At that date, Subsidiary Ltd's net assets were represented by its shareholders' equity consisting of share capital of $100,000 and retained earnings of $70,000. On the date of the acquisition, Parent Ltd and Subsidiary Ltd agreed the following (a) Subsidiary's Land had a fair value of $180,000 (carrying amount $100,000). (b) Subsidiary had a patent with a fair value of $100,000 (was not previously recognised in Subsidiary's book). The patent is to amortise over 10 years on straight line basis. (c) Subsidiary had inventories that were $30,000 lower than fair value. These inventories were sold by 30 June 2019. The following intra-company transactions occurred during the year ending 30 June 2020. a) On 1 May 2020, Subsidiary Ltd purchased goods for $150,000 from Parent Ltd on credit at cost plus 50% mark up. As at 30 June 2020, 40% of the inventory was still on hand and 25% of the amount owing for the sales remain unpaid. b) On 1 June 2019, Parent Ltd sold inventory to Subsidiary Ltd for $85,000, recording a before-tax profit of $30,000. By 30 June 2019, Subsidiary Ltd has sold one-third of these to other entities making profits of $54,000 and the remaining inventory was sold by 30 June 2020 for $132,000 to external parties. c) On 1 December 2019, Parent Ltd sold an item of machinery for $104,000 to Subsidiary Ltd. At the date of sale, Parent Ltd had recorded the asset at a carrying amount of $80,000 (accumulated depreciation: $20,000. depreciation rate: 10% p.a. straight-line method). d) Parent Ltd provided a warehouse to Subsidiary Ltd since 1 March 2019. The rent is $12,000 per annum and payable in arrears 6 monthly on 31 August and 28 February each year. Both companies record accruals. Required A Prepare the following a) Acquisition analysis at 1 January 2019 (5 marks) b) A consolidation worksheet for the year ending 30 June 2020 (use the template provided, add more lines if necessary: show all workings. You do not need to submit the journal entries as these entries will not be marked) (51 marks) c) A consolidated Statement of Changes in Equity for the year ending 30 June 2020 (4 marks) "livate x] wa (b) Consolidation Worksheet Parent Ltd Subsidiary Ltd Adjustments Dr Consolidated Sales 1,050,000 509,100 Less Cost of Sales 281,000 Gross Profit Add Dividend Income Add Rental Income Add Gain on Sale of Machine (Proceeds Less Occupancy Expenses including Rent Less Admin Expenses Less Depreciation & Amortisation Less Other Expenses Profit before tax 510,000 500,000 35,000 12,000 24,000 37,000 46,000 62,000 40,000 426,000 228, 100 0 0 0 29,500 15,000 40,000 10,000 133,600 Less Income Tax Expenses 80,000 24,600 Profit after tax 346,000 109,000 Retained earnings (1 July 2019) 124,000 90,000 Less Dividends (paid and declared) Retained earnings (30 June 2020) General reserve Share Capital (20,000) 400,000 36,000 400,000 (35,000) 164,000 0 100,000 BCVR o 0 Deferred tax liabilities 0 0 80,000 Trade & Other Payables Dividend payable Bank Overdraft Total Shareholders' equity and Liabilities Land Machinery, at cost Less Accumulated Depreciation Patent at cost Less Accumulated Amortisation Investment in Subsidiary Ltd Goodwill Dividend receivable 70,000 90.000 1,076,000 142.000 370,000 (120,000 40,000 0 340,000 0 20,000 75,000 20,000 0 359,000 100,000 135,000 (55,000) D 0 D 15,000 0 w 1 Normal 1 Body Text 1 No Spac... 1 Table Pa... 1 Heading 1 Headin Styles Paragraph Less Dividends (paid and dedared) Retained earnings (30 June 2020) General reserve Share Capital (70,000) 400,000 36,000 400,000 (35,000) 164,000 100,000 BCVR 0 0 Deferred tax liabilities 0 0 80,000 75,000 Trade & Other Payables Dividend payable Bank Overdraft Total Shareholders' equity and Liabilities Land Machinery, at cost Less Accumulated Depreciation Patent at cost Less Accumulated Amortisation Investment in Subsidiary Ltd Goodwill Dividend receivable 70,000 90,000 1,076,000 142,000 370,000 (120,000) 40,000 0 340,000 0 20,000 20,000 0 359,000 100,000 135,000 (55,000) 0 0 0 15,000 0 Deferred tax assets 0 0 60,000 79,000 Inventories 169,000 Trade & Other Receivables 95,000 Cash and cash equivalent 20,000 Total Assets 1,076,000 ACCT6005 Assessment 2 Case Study Brief.docx 25,000 359,000 Page 5 of 6

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