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Marking Guide - Question 4

Max. marks awarded

1)

Consolidated statement of cash flows

7.5

Presentation

1.5

Workings

15

2)

Reconciliation prepared in accordance with AASB107

4

Workings

4

3)

Note disclosure for acquisition of subsidiary

prepared in accordance with AASB107

3

Total

35

Question 4 (35 marks) Snow Ltd is a parent entity in a group that is a reporting entity. Extracts from the statement of profit or loss and other comprehensive income and consolidated statement of changes in equity of the Snow Ltd Group for the year ended 30 June 2018 and its two most recent statements of financial position are set out below: Snow Ltd Group Consolidated Statement of Comprehensive Income for the year ended 30 June 2018 $000 5000 Revenues from ordinary activities Sales revenue 504 Profit on sale of land 5 509 Expenses Cost of sales (245) Salaries (120) Doubtful debts (5) Depreciation - buildings (5) Depreciation - equipment (4) Loss on sale ofequipment (1) Other operating expenses [E1 388 Profit before income tax 121 Income tax expense [ Profit for the period 91 Snow Ltd Group Other comprehensive income Asset revaluation for land 25 Asset revaluation for buildings 5 Income tax relating to components of other comprehensive income (g1 Other comprehensive income for the year, net of tax 21 Total comprehensive income for the year 11 Snow Ltd Group Consolidated Statement of Financial Position at 30 June 2018 2017 5000 5000 Current assets Cash and cash equivalents 25 _ Inventories 24 25 Trade receivables 43 35 Less: Provision for doubtful debts (4) (3) Non-current assets Land 280 240 Buildings 193 160 Less: Accumulated depreciation _ (20) Equipment 70 74 Less: Accumulated depreciation (12) (10) Goodwill on acquisition 32 - 651 502 Current liabilities Snow Ltd Group Trade and other payables 42 39 Bank overdraft 21 90 Income tax payable 21 18 Non current liabilities Long-term loans 240 200 Deferred tax liability 39 24 Equity Share capital 170 100 Revalation reserve 31 10 Retained earnings 37 21 651 502 Snow Ltd Group Consolidated Statement of Changes in Equity for the year ended 30 June 2018 Share Revaluation Retained Total capital reserve earnings equity $000 $000 $000 $000 Balance 1 July 2017 100 10 21 131 Proceeds of share issue 70 70 Total comprehensive income for the year 21 91 112 Interim dividend paid {151 1;} Balance 30 June 2018 170 31 37 288 Additional information: 1. Land and buildings were revalued by directors based on future economic benefits as at 30 June 2018. The revaluation increment was $25,000 for land and $5,000 for buildings. 2. Equipment with a carrying amount of $2,000 (cost $4,000 and accumulated depreciation of $2,000) was sold for $1,000. 3. Assume all other transactions result in a cash flow unless otherwise stated above, or clearly implied by the nature of the transaction. 4. Land with a carrying amount of $60,000 was sold of $65,000. 5. The companytax rate is 30%. 6. On 30 June 2018, Snow Ltd acquired 100% ofthe shares in Flake Ltd for a cash consideration of $33,000. The fair value of the net assets of Flake Ltd at the time of acquisition was: Fair value of subsidiary net assets at date of acquisition $000 Inventories 3 Trade receivables 2 Trade and other payables El 1 Goodwill on acquisition 32 33 Required: 1. Prepare a consolidated statement of cash flows for Snow Ltd Group for the year ended 30 June 2018 in accordance with AASB 107 using the direct method. Show all workings. (24 marks) 2. Prepare a reconciliation ofnet cash provided by operating activities to profit in accordance with AASB 107. (8 marks) 3. Prepare a note to disclose the acquisition of Flake Pty Ltd in accordance with AASB 107. {3 marks)