Problem 1 Ex22.4 CONSOLIDATION WORKSHEET, CONSOLIDATED FINANCIAL STATEMENTS On 1 July 2015, Sienna Ltd acquired all the shares of Amber Lid for $160 000. The financial statements of the two entities at 30 June 2016 contained the following information: Sienna Ltd Sales revenue Amber Lid Dividend revenue $ 234 800 $ 200 000 17 000 Other income 6 600 Cost of sales 258 400 200 000 (123 000) Other expenses (120 000) (34 600) (20 000) Profit before income tax (157 600) (140 000) 100 800 60 000 Income tax expense (32 000) Profit for the year (20 000) Retained earnings (1/7/15) 68 800 40 000 24 000 Total available for appropriation 12 000 Dividend paid from 2014-15 profit 92 800 52 000 Interim dividend paid from 2015-16 profit (18 000) (5 000) Dividend declared from 2015-16 profit (16000) (4 800) Transfer to general reserve (16000) (7 200) (8 000) Retained earnings (30/6/16) (58000) (17 000) 34 800 35 000 Current assets Cash S 1 000 40 Receivables Allowance for doubtful debts 27 000 12 100 (500) Financial assets (300) 20000 10 000 Inventory Total current assets 48 000 47 000 95 500 68 840 Non-current assets Plant and machinery 100 000 Accumulated depreciation 70 000 Land (40 000) 26000 Debentures in Amber Lid 102 300 190 000 Shares in Amber Lid 57 000 160 000 Total non-current assets 379 300 Total assets 234 000 474 800 302 840 Current liabilities Dividend payable 16000 Provisions 7 200 12 000 Bank overdraft 8 800 Current tax liabilities 14840 Total current liabilities 11 000 10 000 39000 40 840 Non-current liabilities 12% mortgage debentures Deferred tax liabilities 80 000 Total non-current liabilities 13 000 5 000 13000 Total liabilities 85 000 52 000 Net assets 125 840 $_422 800 $ 177 000Sienna Lid Amber Lid Equity Share capital $ 320 000 $ 120 000 General reserve 60 000 20000 Retained earnings 34 800 35000 Other components of equity 8 000 2000 Total equity $ 422 800 $ 177 000 Additional information (a) At 1 July 2015, all identifiable assets and liabilities of Amber Ltd were recorded at fair values except for inventory, for which the fair value was $1000 greater than the carrying amount. This inventory was all sold by 30 June 2016. At 1 July 2015, Amber Ltd had research and development outlays that it had expensed as incurred. Sienna Ltd measured the fair value of the in-process research and development at $8000. By 30 June 2016, it was assessed that $2000 of this was not recoverable. At 1 July 2015, Amber Ltd had reported a contingent liability relating to a guarantee that was considered to have a fair value of $7000. This liability still existed at 30 June 2016. At 1 July 2015, Amber Ltd had not recorded any goodwill. (b) The debentures were issued by Amber Ltd at nominal value on 1 July 2014, and are redeemable on 30 June 2020. Sienna Ltd acquired its holding ($60 000) of these debentures on the open market on 1 January 2016, immediately after the half-yearly interest payment had been made. All interest has been paid and brought to account in the records of both entities. (c) During the 2015-16 period, Sienna Ltd sold inventory to Amber Lid for $40 000, at a mark-up of cost plus 25%. At 30 June 2016, $10 000 worth of inventory was still held by Amber Ltd. (d) The Other Components of Equity account relates to the financial assets. For the 2015-16 period, Sienna Ltd recorded an increase in these assets of $3000, and Amber Ltd recorded a decrease of $2000. (e) The income tax rate is 30%. Required Prepare the consolidated financial statements for Sienna Ltd and its subsidiary for the year ended 30 June 2016