Question 1 (Marks 10) You own a financial accounting services called MyOwnWork Consultancy Pty Ltd It's the company you have established after graduating with honours degree in accounting and management The finance director of Millionaires Club Pty Ltd (MC) which is a private company with many strategic investments, approached you and began discussing his concern that he might be required to consolidate some of these investments, pursuant to AASB 10 Details of the investment relationships are as follows a)MC has a 25 per cent interest in the share capital of LBX Pty Limited (LBX), which is a company involved in the same industry as MC The remaining 75 per cent of the share capital is owned by LBX's founders, Mr and Mrs T Mr and Mrs T are unfamiliar with the industry and so have given MC three seats out of the five seats available on the board of directors MC takes all the lead on all decisions, but the business is closely monitored by Mr and Mrs T, who hold the other two board positions b)MC has a substantial loan receivable from BBT Pty Ltd (BBT) BBT, as a result ofthe current economic climate, has experienced significant trading problems BBT has failed to make its regular payments under the loan with the management of BBT that MC executives will take control of the company's finances for a period of five years An executive of MC has been given control of BBT's cheque book and makes all payments MC has not gained any seats on BBT's board of directors, which is still dominated by BBT shareholders c)MC owns 50 per cent of Chatime Tea Ltd (CTL), with the other 50 per cent being owned by Boost Juice Ltd (BJL) Both companies have equal voting rights and an equal share of seats on the board of directors Under the agreement with BJL, MC supplies the finance to the company on normal commercial terms the loan is fully secured against the assets of the company BJL provides the management and entrepreneurial flair to CTL under the agreement forged, BJL will receive a management fee in respect of the net profits of CTL after allowing for interest payments on the MC loan In times of no profits, the interest payments will still be met, but BJL will not receive any remuneration d)MC, Coffee Club Ltd (CCL) and Gloria Jeans Ltd (GJL) are each 33 33 per cent shareholders of PGH Pty Ltd, a small proprietary company that is involved in the music industry CCL and GJL are passive shareholders with the one board seat each out of a total of three MC has one board seat and is also involved in the day to day running of the business e)MC hold a 75 per cent interest in JB Wifi Pty Ltd The interest was created when MC converted a substantial loan it made to JB Wifi into equity at the invitationof JB Wifi when JB Wifi began to trade poorly and recovery of the loan seemed uncertain JB Wifi has a large deficiency in net assets and has been consolidated for many years MC is a passive investor, having no seats on the board of directors and no say in the financing or operating decisions of JB Wifi Page 2 Required Being the owner and CEO of MyOwnWork Consultancy Ltd, advise the finance director of MC of the requirements of AASB 10 in respect of the control criterion Foreachof the above investments, indicate where the control rests and whether or not consolidation will be required Discuss the reasons for your answers Where possible, support your answer with excerpts from AASB 10 You will be marked based on the explanation of your answer and not the Standard's wordings itself Maximum 150 words per situation, excluding any words quoted from the standard Question 2 (Marks 20) ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was as follows Page 3 Statement of financial position TakeItEasy Ltd as at 30 June 2018 $('000) $('000) Assets Accounts receivable 70 Liabilities Loan 300 Inventory 100 Land 400 Shareholders' equity Property, plant and equip 700 Share Capital 500 Accumulateddepreciation (270) Retained Earnings 200 1,000 1,000 Additional Information Tax rate is 30 per cent As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000 TakeItEasy Ltdadopts the cost model for measuring its property, plant and equipment The property,plant and equipment is expected to have a remaining useful life of 10 years, and no residual value One year following acquisition it was considered that TakeItEasy Ltd's goodwill had a recoverable amount of $60 000 TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre acquisition retained earnings The statements of financial position and statements of comprehensive income of ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019 ChallengeMe Pty Ltd TakeItEasy Ltd ($000) ($000) Assets Cash 80 40 Accounts receivable 50 50 Inventory 140 123 Land 600 400 Property Plant andequipment 900 700 Accumulateddepreciation (300) (313) Investment in TakeltEasy Ltd 900 Totalnon current assets 2,370 1,000 Liabilities Accounts payable 100 10 Dividends payable 100 50 Loan 670 140 Shareholders' equity Share capital 1,000 500 Retained earnings 500 300 Total shareholders' equity 2,370 1,000 Page 4 Reconciliation of opening and closing retained earnings Profit after tax400 190 Retained earnings 30 June 2018300 200 Interim dividend(90) (40) Final dividend (110) (50) Retained earnings 30 June 2019 500 300 Required Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with the following Acquisition analysis in recognition for Goodwill or Gain from Bargain Purchase Show relevant calculations All relevant worksheet journal entries oFair Value of assets adjustment oPre acquisition eliminating entries Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts Consolidated statement of financial position of ChallengeMe Group Question 3 (Marks 10) I Love Corporate Accounting Ltd commences operations on 1 July 2018 and presents its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2019 The statements are prepared before considering taxation The following information is available Page 5 Statement of profit or loss and other comprehensive income for the year ended 30 June2019 Gross Profit730,000 Expenses Administration expenses 80,000 Salaries 200,000 Long service Leave 20,000 Warranty expenses 30,000 Depreciation expense plant 80,000 Insurance 20,000430,000 Accounting profit before tax 300,000 Other comprehensive income Nil Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019 Assets Cash 20,000 Inventory 100,000 Accounts receivable 100,000 Prepaid Insurance 10,000 Plant cost 400,000 Less Accumulated depreciation 80,000 320,000 Total assets 550,000 Liabilities Accounts payable 80,000 Provision for warranty expenses 20,000 Loan payable 200,000 Provision for long service leave expenses 20,000 Total liabilities 320,000 Net assets 230,000 Other information All administration and salaries expenses incurred have been paid as at year end None of the long service leave expense has actually been paid Warranty expenses were accrued, and at year end, actual payments of $10 000 have been made (leaving an accrued balance of $20 000) Insurancewasinitiallyprepaidtotheamountof $30 000 Atyearend, the unused component of the prepaid insurance amounted to $10 000 Amounts received from sales, including those on credit terms, are taxed at the time of sale is made The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes The tax rate is 30 per cent Required Prepare Deferred Tax worksheet for I Love Corporate Accounting Ltd as at 30 June 2019 and provide the Journal entries to account for tax in accordance with AASB 112 Include supporting calculation such as Taxable Income Question 4 (Marks 20) Assuming that Wiley Sons Australasia Ltd acquires 70 per cent of WileyPlus Ltd for acash price of $10 million when the share capital reserves of WileyPlus are Share Capital$8 million Retained Earnings $2 million $10 million Required a)What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non controlling interest in the acquirer is measured at fair value b)What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3, assuming that any non controlling interest in the acquirer is measured at the non controlling interest's proportionate share of the acquiree's identifiable net assets c)What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation Discuss your answer Maximum 200 words Page 6 Question 5 (Marks 40) The following financial statements of FinalHeadache Ltd and its subsidiary Solutions Ltd have been extracted from their financial records at 30 June 2019 Reconciliation of opening and closing retained earningsPage 7 FinalHeadache Ltd Solutions Ltd ($000) ($000) Sales revenue 671 4 540 Costs of goods sold (464) (238) Gross Profit 207 4 302 Dividends received from SolutionsLtd 93 Management fee revenue 26 5 Gain on sale of plant 40 35 Expenses Administrativeexpenses (30 8) (38 7) Depreciation (29 5) (56 8) Management fee expenses (26 5) Other expenses (101 1) (72) Profit before tax 205 5 143 Tax expense (61 5) (42 2) Profit for the year 144 100 8 Retained earning 30 June2018 319 4 239 2 463 4 340 Dividends paid (137 4) (93) Retained earnings at 30 June2019 326 247 Statements of financial position FinalHeadache Ltd ($000) Solutions Ltd ($000) Shareholders' equity Retained earnings 326 247 Share capital Current liabilities Accounts payable 350 54 7 200 46 3 Tax payable Non current liabilities Loans 41 3 173 5 25 116 Current assets 945 5 634 3 Accounts receivable 59 4 62 3 Inventory Non current assets Land Buildings 92 224 29 326 Plant at cost 299 85 355 8 Accumulated depreciation plant (85 75) (138 80) Investment in Solutions Ltd 356 945 5 634 3 Other Information FinalHeadache Ltd acquired its 100 per cent interest in Solutions Ltd on 1 July 2014, that is five years earlier At that date the capital and reserves of Solutions Ltd were Share Capital $200 000 Retained Earnings $180 000 $380 000 Page 8 At the date of acquisition all assets were considered to be fairly valued (Thank goodness ) During the year FinalHeadache Ltd made a total sales to Solutions Ltd of $60 000, while Solutions Ltd sold $50 000 in inventory to FinalHeadache Ltd The opening inventory in FinalHeadache Ltd as at 1 July 2018 included inventory acquired from Solutions Ltd for $40 000 that costs Solutions Ltd $30 000 to produce The closing inventory in FinalHeadache Ltd includes inventory acquired from Solutions Ltd at a cost of $33 000 This cost Solutions Ltd $28 000 to produce Closing inventory of Solutions Ltd includes inventory acquired from FinalHeadache Ltd at a cost of $12 000 This cost FinalHeadache Ltd $10 000 to produce On 1 July 2018 Solutions Ltd sold an item of plant to FinalHeadache Ltd for $116 000 when its carrying value in Solutions Ltd's account was $81 000 (cost $135 000, accumulated depreciation $54 000) This plant is assessed as having a remaining useful life of six years The Group has a policy of measuring its property, plant and equipment using the 'cost model' Solutions Ltd paid $26 500 in management fee to FinalHeadache Ltd The tax rate is 30 per cent Required Prepare the following for FinalHeadache Ltd and Solutions Ltd as at 30 June 2019 Acquisition analysis to recognise Goodwill or Gain from Bargain Purchase show supporting calculations All relevant worksheet entries Pre acquisition eliminating entries Intercompany eliminating entries Consolidated worksheet for FinalHeadache Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts Consolidated statement of profit or loss of FinalHeadache Group Consolidated statement of financial position of FinalHeadache Group Question 1 (Marks 10) You own a financial accounting services called MyOwnWork Consultancy Pty Ltd It's the company you have established after graduating with honours degree in accounting and management The finance director of Millionaires Club Pty Ltd (MC) which is a private company with many strategic investments, approached you and began discussing his concern that he might be required to consolidate some of these investments, pursuant to AASB 10 Details of the investment relationships are as follows a) MC has a 25 per cent interest in the share capital of LBX Pty Limited (LBX), which is a company involved in the same industry as MC The remaining 75 per cent of the share capital is owned by LBX's founders, Mr and Mrs T Mr and Mrs T are unfamiliar with the industry and so have given MC three seats out of the five seats available on the board of directors MC takes all the lead on all decisions, but the business is closely monitored by Mr and Mrs T, who hold the other two board positions b) MC has a substantial loan receivable from BBT Pty Ltd (BBT) BBT, as a result of the current economic climate, has experienced significant trading problems BBT has failed to make its regular payments under the loan with the management of BBT that MC executives will take control of the company's finances for a period of five years An executive of MC has been given control of BBT's cheque book and makes all payments MC has not gained any seats on BBT's board of directors, which is still dominated by BBT shareholders c) MC owns 50 per cent of Chatime Tea Ltd (CTL), with the other 50 per cent being owned by Boost Juice Ltd (BJL) Both companies have equal voting rights and an equal share of seats on the board of directors Under the agreement with BJL, MC supplies the finance to the company on normal commercial terms the loan is fully secured against the assets of the company BJL provides the management and entrepreneurial flair to CTL under the agreement forged, BJL will receive a management fee in respect of the net profits of CTL after allowing for interest payments on the MC loan In times of no profits, the interest payments will still be met, but BJL will not receive any remuneration d) MC, Coffee Club Ltd (CCL) and Gloria Jeans Ltd (GJL) are each 33 33 per cent shareholders of PGH Pty Ltd, a small proprietary company that is involved in the music industry CCL and GJL are passive shareholders with the one board seat each out of a total of three MC has one board seat and is also involved in the day to day running of the business e) MC hold a 75 per cent interest in JB Wifi Pty Ltd The interest was created when MC converted a substantial loan it made to JB Wifi into equity at the invitationof JB Wifi when JB Wifi began to trade poorly and recovery of the loan seemed uncertain JB Wifi has a large deficiency in net assets and has been consolidated for many years MC is a passive investor, having no seats on the board of directors and no say in the finan cing or opera ting decisi ons of JB Wifi Page 2 Required Being the owner and CEO of MyOwnWork Consultancy Ltd, advise the finance director of MC of the requirements of AASB 10 in respect of the control criterion For each of the above investments, indicate where the control rests and whether or not consolidation will be Page 3 required Discuss the reasons for your answers Where possible, support your answer with excerpts from AASB 10 You will be marked based on the explanation of your answer and not the Standard's wordings itself Maximum 150 words per situation, excluding any words quoted from the standard Question 2 (Marks 20) ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was as follows Statement of financial position TakeItEasy Ltd as at 30 June 2018 $('000) Assets Accounts receivable Inventory Land Property, plant and equip Accumulated depreciation 70 100 400 700 (270) 1,000 $('000) Liabilities Loan Shareholders' equity Share Capital Retained Earnings 300 500 200 1,000 Additional Information Tax rate is 30 per cent As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000 TakeItEasy Ltd adopts the cost model for measuring its property, plant and equipment The property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value One year following acquisition it was considered that TakeItEasy Ltd's goodwill had a recoverable amount of $60 000 TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre acquisition retained earnings The statements of financial position and statements of comprehensive income of ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019 ChallengeMe Pty Ltd ($000) TakeItEasy Ltd ($000) 80 50 140 600 900 (300) 900 2,370 40 50 123 400 700 (313) 1,000 100 100 670 10 50 140 1,000 500 2,370 500 300 1,000 400 300 (90) (110) 500 190 200 (40) (50) 300 Assets Cash Accounts receivable Inventory Land Property Plant and equipment Accumulated depreciation Investment in TakeltEasy Ltd Total non current assets Liabilities Accounts payable Dividends payable Loan Shareholders' equity Share capital Retained earnings Total shareholders' equity Reconciliation of opening and closing retained earnings Profit after tax Retained earnings 30 June 2018 Interim dividend Final dividend Retained earnings 30 June 2019 Required Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with the following Acquisition analysis in recognition for Goodwill or Gain from Bargain Purchase Show relevant calculations All relevant worksheet journal entries o Fair Value of assets adjustment o Pre acquisition eliminating entries Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and Page 4 consolidated amounts Consolidated statement of financial position of ChallengeMe Group Question 3 (Marks 10) I Love Corporate Accounting Ltd commences operations on 1 July 2018 and presents its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2019 The statements are prepared before considering taxation The Page 5 following information is available Statement of profit or loss and other comprehensive income for the year ended 30 June 2019 Gross Profit 730,000 Expenses Administration expenses 80,000 Salaries 200,000 Long service Leave 20,000 Warranty expenses 30,000 Depreciation expense plant 80,000 Insurance 20,000 430,000 Accounting profit before tax 300,000 Other comprehensive income Nil Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019 Assets Cash 20,000 Inventory 100,000 Accounts receivable 100,000 Prepaid Insurance 10,000 Plant cost 400,000 Less Accumulated depreciation 80,000 320,000 Total assets 550,000 Liabilities Accounts payable 80,000 Provision for warranty expenses 20,000 Loan payable 200,000 Provision for long service leave expenses 20,000 Total liabilities 320,000 Net assets 230,000 Other information All administration and salaries expenses incurred have been paid as at year end None of the long service leave expense has actually been paid Warranty expenses were accrued, and at year end, actual payments of $10 000 have been made (leaving an accrued balance of $20 000) Insurance was initially prepaid to the amount of $30 000 At year end, the unused component of the prepaid insurance amounted to $10 000 Amounts received from sales, including those on credit terms, are taxed at the time of sale is made The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes The tax rate is 30 per cent Required Prepare Deferred Tax worksheet for I Love Corporate Accounting Ltd as at 30 June 2019 and provide the Journal entries to account for tax in accordance with AASB 112 Include supporting calculation such as Taxable Income Question 4 (Marks 20) Assuming that Wiley Sons Australasia Ltd acquires 70 per cent of WileyPlus Ltd for a cash price of $10 million when the share capital reserves of WileyPlus are Share Capital Retained Earnings $8 million $2 million $10 million Required a) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non controlling interest in the acquirer is measured at fair value b) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3, assuming that any non controlling interest in the acquirer is measured at the non controlling interest's proportionate share of the acquiree's identifiable net assets c) What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation Discuss your answer Maximum 200 words Page 6 Question 5 (Marks 40) The following financial statements of FinalHeadache Ltd and its subsidiary Solutions Ltd have been extracted from their financial records at 30 June 2019 Reconciliation of opening and closing retained earnings Page 7 Sales revenue Costs of goods sold Gross Profit Dividends received from Solutions Ltd Management fee revenue Gain on sale of plant Expenses Administrative expenses Depreciation Management fee expenses Other expenses Profit before tax Tax expense Profit for the year Retained earning 30 June 2018 Dividends paid Retained earnings at 30 June 2019 FinalHeadache Ltd ($000) 671 4 (464) 207 4 93 26 5 40 Solutions Ltd ($000) 540 (238) 302 35 (30 8) (29 5) (101 1) 205 5 (61 5) 144 319 4 463 4 (137 4) 326 (38 7) (56 8) (26 5) (72) 143 (42 2) 100 8 239 2 340 (93) 247 Statements of financial position FinalHeadache Ltd ($000) Shareholders' equity Retained earnings Share capital Current liabilities Accounts payable Tax payable Non current liabilities Loans Current assets Accounts receivable Inventory Non current assets Land Buildings Plant at cost Accumulated depreciation plant Investment in Solutions Ltd Solutions Ltd ($000) 326 350 247 200 54 7 41 3 46 3 25 173 5 945 5 116 634 3 59 4 92 62 3 29 224 299 85 (85 75) 356 945 5 326 355 8 (138 80) 634 3 Other Information FinalHeadache Ltd acquired its 100 per cent interest in Solutions Ltd on 1 July 2014, that is five years earlier At that date the capital and reserves of Solutions Ltd were Share Capital Retained Earnings $200 000 $180 000 $380 000 Page 8 At the date of acquisition all assets were considered to be fairly valued (Thank goodness ) During the year FinalHeadache Ltd made a total sales to Solutions Ltd of $60 000, while Solutions Ltd sold $50 000 in inventory to FinalHeadache Ltd The opening inventory in FinalHeadache Ltd as at 1 July 2018 included inventory acquired from Solutions Ltd for $40 000 that costs Solutions Ltd $30 000 to produce The closing inventory in FinalHeadache Ltd includes inventory acquired from Solutions Ltd at a cost of $33 000 This cost Solutions Ltd $28 000 to produce Closing inventory of Solutions Ltd includes inventory acquired from FinalHeadache Ltd at a cost of $12 000 This cost FinalHeadache Ltd $10 000 to produce On 1 July 2018 Solutions Ltd sold an item of plant to FinalHeadache Ltd for $116 000 when its carrying value in Solutions Ltd's account was $81 000 (cost $135 000, accumulated depreciation $54 000) This plant is assessed as having a remaining useful life of six years The Group has a policy of measuring its property, plant and equipment using the 'cost model' Solutions Ltd paid $26 500 in management fee to FinalHeadache Ltd The tax rate is 30 per cent Required Prepare the following for FinalHeadache Ltd and Solutions Ltd as at 30 June 2019 Acquisition analysis to recognise Goodwill or Gain from Bargain Purchase show supporting calculations All relevant worksheet entries o Pre acquisition eliminating entries o Intercompany eliminating entries Consolidated worksheet for FinalHeadache Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts Consolidated statement of profit or loss of FinalHeadache Group Consolidated statement of financial position of FinalHeadache Group

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Question 1: (Marks 10) You own a financial accounting services called MyOwnWork Consultancy Pty Ltd. It's the company you have established after graduating with honours

Question 1: (Marks 10)

You own a financial accounting services called MyOwnWork Consultancy Pty Ltd. It's the company you have established after graduating with honours degree in accounting and management. The finance director of Millionaires Club Pty Ltd (MC) which is a private company with many strategic investments, approached you and began discussing his concern that he might be required to consolidate some of these investments, pursuant to AASB 10. Details of the investment relationships are as follows:

a)MC has a 25 per cent interest in the share capital of LBX Pty Limited (LBX), which is a company involved in the same industry as MC. The remaining 75 per cent of the share capital is owned by LBX's founders, Mr and Mrs T. Mr and Mrs T are unfamiliar with the industry and so have given MC three seats out of the five seats available on the board of directors. MC takes all the lead on all decisions, but the business is closely monitored by Mr and Mrs T, who hold the other two board positions.

b)MC has a substantial loan receivable from BBT Pty Ltd (BBT). BBT, as a result ofthe current economic climate, has experienced significant trading problems. BBT has failed to make its regular payments under the loan with the management of BBT that MC executives will take control of the company's finances for a period of five years. An executive of MC has been given control of BBT's cheque book and makes all payments. MC has not gained any seats on BBT's board of directors, which is still dominated by BBT shareholders.

c)MC owns 50 per cent of Chatime Tea Ltd (CTL), with the other 50 per cent being owned by Boost Juice Ltd (BJL). Both companies have equal voting rights and an equal share of seats on the board of directors. Under the agreement with BJL, MC supplies the finance to the company on normal commercial terms. the loan is fully secured against the assets of the company. BJL provides the management and entrepreneurial flair to CTL. under the agreement forged, BJL will receive a management fee in respect of the net profits of CTL after allowing for interest payments on the MC loan. In times of no profits, the interest payments will still be met, but BJL will not receive any remuneration.

d)MC, Coffee Club Ltd (CCL) and Gloria Jeans Ltd (GJL) are each 33.33 per cent shareholders of PGH Pty Ltd, a small proprietary company that is involved in the music industry. CCL and GJL are passive shareholders with the one board seat each out of a total of three. MC has one board seat and is also involved in the day-to-day running of the business.

e)MC hold a 75 per cent interest in JB Wifi Pty Ltd. The interest was created when MC converted a substantial loan it made to JB Wifi into equity at the invitationof JB Wifi when JB Wifi began to trade poorly and recovery of the loan seemed uncertain. JB Wifi has a large deficiency in net assets and has been consolidated for many years. MC is a passive investor, having no seats on the board of directors and no say in the financing or operating decisions of JB Wifi.

Page | 2

Required:

Being the owner and CEO of MyOwnWork Consultancy Ltd, advise the finance director of MC of the requirements of AASB 10 in respect of the control criterion. Foreachof the above investments, indicate where the control rests and whether or not consolidation will be required. Discuss the reasons for your answers. Where possible, support your answer with excerpts from AASB 10.

You will be marked based on the explanation of your answer and not the Standard's wordings itself.Maximum 150 words per situation, excluding any words quoted from the standard.

Question 2 (Marks 20)

ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was as follows:

Page | 3

Statement of financial position TakeItEasy Ltd as at 30 June 2018

$('000)

Assets

Accounts receivable

Liabilities

Loan

300

Inventory

100

Land

400

Shareholders' equity

Property, plant and equip

700

Share Capital

500

Accumulateddepreciation

(270)

Retained Earnings

200

1,000

Additional Information:

Tax rate is 30 per cent

As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000.TakeItEasy Ltdadopts the cost model for measuring its property, plant and equipment. The property,plant and equipment is expected to have a remaining useful life of 10 years, and no residual value.

One year following acquisition it was considered that TakeItEasy Ltd's goodwill had a recoverable amount of $60 000.

TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre-acquisition retained earnings.

The statements of financial position and statements of comprehensive income of ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows:

Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019

ChallengeMe Pty Ltd

TakeItEasy Ltd

($000)

Assets

Cash

Accounts receivable

Inventory

140

123

Land

600

400

Property Plant andequipment

900

700

Accumulateddepreciation

(300)

(313)

Investment in TakeltEasy Ltd

900

Totalnon-current assets

2,370

1,000

Liabilities

Accounts payable

100

Dividends payable

100

Loan

670

140

Shareholders' equity

Share capital

1,000

500

Retained earnings

500

300

Total shareholders' equity

2,370

1,000

Page | 4

Reconciliation of opening and closing retained earnings

Profit after tax400

190

Retained earnings -- 30 June 2018300

200

Interim dividend(90)

(40)

Final dividend (110)

(50)

Retained earnings -- 30 June 2019 500

300

Required:

Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with the following:

Acquisition analysis in recognition for Goodwill or Gain from Bargain Purchase.

Show relevant calculations

All relevant worksheet journal entries

oFair Value of assets adjustment

oPre-acquisition eliminating entries

Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts

Consolidated statement of financial position of ChallengeMe Group.

Question 3 (Marks 10)

I Love Corporate Accounting Ltd commences operations on 1 July 2018 and presents its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2019. The statements are prepared before considering taxation. The following information is available:

Page | 5

Statement of profit or loss and other comprehensive income for the year ended 30 June2019

Gross Profit730,000

Expenses

Administration expenses

80,000

Salaries

200,000

Long-service Leave

20,000

Warranty expenses

30,000

Depreciation expense - plant

80,000

Insurance

20,000430,000

Accounting profit before tax

300,000

Other comprehensive income

Nil

Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019

Assets

Cash

20,000

Inventory

100,000

Accounts receivable

100,000

Prepaid Insurance

10,000

Plant - cost

400,000

Less: Accumulated depreciation

80,000

320,000

Total assets

550,000

Liabilities

Accounts payable

80,000

Provision for warranty expenses

20,000

Loan payable

200,000

Provision for long service leave expenses

20,000

Total liabilities

320,000

Net assets

230,000

Other information

All administration and salaries expenses incurred have been paid as at year end.

None of the long service leave expense has actually been paid.

Warranty expenses were accrued, and at year end, actual payments of $10 000 have been made (leaving an accrued balance of $20 000).

Insurancewasinitiallyprepaidtotheamountof $30 000.Atyearend, the unused component of the prepaid insurance amounted to $10 000.

Amounts received from sales, including those on credit terms, are taxed at the time of sale is made.

The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes.

The tax rate is 30 per cent

Required:

Prepare Deferred Tax worksheet for I Love Corporate Accounting Ltd as at 30 June 2019 and provide the Journal entries to account for tax in accordance with AASB 112. Include supporting calculation such as Taxable Income.

Question 4 (Marks 20)

Assuming that Wiley & Sons Australasia Ltd acquires 70 per cent of WileyPlus Ltd for acash price of $10 million when the share capital reserves of WileyPlus are:

Share Capital$8 million Retained Earnings$2 million

$10 million

Required:

a)What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at fair value?

b)What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3, assuming that any non-controlling interest in the acquirer is measured at the non-controlling interest's proportionate share of the acquiree's identifiable net assets?

c)What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation?Discuss your answer.Maximum 200 words.

Page | 6

Question 5 (Marks 40)

The following financial statements of FinalHeadache Ltd and its subsidiary Solutions Ltd have been extracted from their financial records at 30 June 2019.

Reconciliation of opening and closing retained earningsPage | 7

FinalHeadache Ltd

Solutions Ltd

($000)

Sales revenue

671.4

540

Costs of goods sold

(464)

(238)

Gross Profit

207.4

302

Dividends received from SolutionsLtd

Management fee revenue

26.5

Gain on sale of plant

Expenses

Administrativeexpenses

(30.8)

(38.7)

Depreciation

(29.5)

(56.8)

Management fee expenses

(26.5)

Other expenses

(101.1)

(72)

Profit before tax

205.5

143

Tax expense

(61.5)

(42.2)

Profit for the year

144

100.8

Retained earning -- 30 June2018

319.4

239.2

463.4

340

Dividends paid

(137.4)

(93)

Retained earnings at 30 June2019

326

247

Statements of financial position

FinalHeadache Ltd

($000)

Solutions Ltd

($000)

Shareholders' equity

Retained earnings

326

247

Share capital Current liabilities Accounts payable

350

54.7

200

46.3

Tax payable

Non-current liabilities

Loans

41.3

173.5

116

Current assets

945.5

634.3

Accounts receivable

59.4

62.3

Inventory

Non-current assets

Land & Buildings

224

326

Plant - at cost

299.85

355.8

Accumulated depreciation - plant

(85.75)

(138.80)

Investment in Solutions Ltd

356

945.5

634.3

Other Information:

FinalHeadache Ltd acquired its 100 per cent interest in Solutions Ltd on 1 July 2014, that is five years earlier.At that date the capital and reserves of Solutions Ltd were:

Share Capital

$200 000

Retained Earnings

$180 000

$380 000

Page | 8

At the date of acquisition all assets were considered to be fairly valued (Thank goodness!)

During the year FinalHeadache Ltd made a total sales to Solutions Ltd of $60 000, while Solutions Ltd sold $50 000 in inventory to FinalHeadache Ltd.
The opening inventory in FinalHeadache Ltd as at 1 July 2018 included inventory acquired from Solutions Ltd for $40 000 that costs Solutions Ltd $30 000 to produce.
The closing inventory in FinalHeadache Ltd includes inventory acquired from Solutions Ltd at a cost of $33 000.This cost Solutions Ltd $28 000 to produce
Closing inventory of Solutions Ltd includes inventory acquired from FinalHeadache Ltd at a cost of $12 000.This cost FinalHeadache Ltd $10 000 to produce.
On 1 July 2018 Solutions Ltd sold an item of plant to FinalHeadache Ltd for $116 000 when its carrying value in Solutions Ltd's account was $81 000 (cost $135 000, accumulated depreciation $54 000). This plant is assessed as having a remaining useful life of six years. The Group has a policy of measuring its property, plant and equipment using the 'cost model'.
Solutions Ltd paid $26 500 in management fee to FinalHeadache Ltd.
The tax rate is 30 per cent

Required:

Prepare the following for FinalHeadache Ltd and Solutions Ltd as at 30 June 2019:

Acquisition analysis to recognise Goodwill or Gain from Bargain Purchase show supporting calculations
All relevant worksheet entries
Pre-acquisition eliminating entries
Intercompany eliminating entries
Consolidated worksheet for FinalHeadache Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts
Consolidated statement of profit or loss of FinalHeadache Group
Consolidated statement of financial position of FinalHeadache Group.

Question 1: (Marks 10) You own a financial accounting services called MyOwnWork Consultancy Pty Ltd. It's the company you have established after graduating with honours degree in accounting and management. The finance director of Millionaires Club Pty Ltd (MC) which is a private company with many strategic investments, approached you and began discussing his concern that he might be required to consolidate some of these investments, pursuant to AASB 10. Details of the investment relationships are as follows: a) MC has a 25 per cent interest in the share capital of LBX Pty Limited (LBX), which is a company involved in the same industry as MC. The remaining 75 per cent of the share capital is owned by LBX's founders, Mr and Mrs T. Mr and Mrs T are unfamiliar with the industry and so have given MC three seats out of the five seats available on the board of directors. MC takes all the lead on all decisions, but the business is closely monitored by Mr and Mrs T, who hold the other two board positions. b) MC has a substantial loan receivable from BBT Pty Ltd (BBT). BBT, as a result of the current economic climate, has experienced significant trading problems. BBT has failed to make its regular payments under the loan with the management of BBT that MC executives will take control of the company's finances for a period of five years. An executive of MC has been given control of BBT's cheque book and makes all payments. MC has not gained any seats on BBT's board of directors, which is still dominated by BBT shareholders. c) MC owns 50 per cent of Chatime Tea Ltd (CTL), with the other 50 per cent being owned by Boost Juice Ltd (BJL). Both companies have equal voting rights and an equal share of seats on the board of directors. Under the agreement with BJL, MC supplies the finance to the company on normal commercial terms. the loan is fully secured against the assets of the company. BJL provides the management and entrepreneurial flair to CTL. under the agreement forged, BJL will receive a management fee in respect of the net profits of CTL after allowing for interest payments on the MC loan. In times of no profits, the interest payments will still be met, but BJL will not receive any remuneration. d) MC, Coffee Club Ltd (CCL) and Gloria Jeans Ltd (GJL) are each 33.33 per cent shareholders of PGH Pty Ltd, a small proprietary company that is involved in the music industry. CCL and GJL are passive shareholders with the one board seat each out of a total of three. MC has one board seat and is also involved in the day-to-day running of the business. e) MC hold a 75 per cent interest in JB Wifi Pty Ltd. The interest was created when MC converted a substantial loan it made to JB Wifi into equity at the invitationof JB Wifi when JB Wifi began to trade poorly and recovery of the loan seemed uncertain. JB Wifi has a large deficiency in net assets and has been consolidated for many years. MC is a passive investor, having no seats on the board of directors and no say in the finan cing or opera ting decisi ons of JB Wifi. Page | 2 Required: Being the owner and CEO of MyOwnWork Consultancy Ltd, advise the finance director of MC of the requirements of AASB 10 in respect of the control criterion. For each of the above investments, indicate where the control rests and whether or not consolidation will be Page | 3 required. Discuss the reasons for your answers. Where possible, support your answer with excerpts from AASB 10. You will be marked based on the explanation of your answer and not the Standard's wordings itself. Maximum 150 words per situation, excluding any words quoted from the standard. Question 2 (Marks 20) ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was as follows: Statement of financial position TakeItEasy Ltd as at 30 June 2018 $('000) Assets Accounts receivable Inventory Land Property, plant and equip Accumulated depreciation 70 100 400 700 (270) 1,000 $('000) Liabilities Loan Shareholders' equity Share Capital Retained Earnings 300 500 200 1,000 Additional Information: Tax rate is 30 per cent As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000. TakeItEasy Ltd adopts the cost model for measuring its property, plant and equipment. The property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value. One year following acquisition it was considered that TakeItEasy Ltd's goodwill had a recoverable amount of $60 000. TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre-acquisition retained earnings. The statements of financial position and statements of comprehensive income of ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows: Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019 ChallengeMe Pty Ltd ($000) TakeItEasy Ltd ($000) 80 50 140 600 900 (300) 900 2,370 40 50 123 400 700 (313) 1,000 100 100 670 10 50 140 1,000 500 2,370 500 300 1,000 400 300 (90) (110) 500 190 200 (40) (50) 300 Assets Cash Accounts receivable Inventory Land Property Plant and equipment Accumulated depreciation Investment in TakeltEasy Ltd Total non-current assets Liabilities Accounts payable Dividends payable Loan Shareholders' equity Share capital Retained earnings Total shareholders' equity Reconciliation of opening and closing retained earnings Profit after tax Retained earnings -- 30 June 2018 Interim dividend Final dividend Retained earnings -- 30 June 2019 Required: Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with the following: Acquisition analysis in recognition for Goodwill or Gain from Bargain Purchase. Show relevant calculations All relevant worksheet journal entries o Fair Value of assets adjustment o Pre-acquisition eliminating entries Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and Page | 4 consolidated amounts Consolidated statement of financial position of ChallengeMe Group. Question 3 (Marks 10) I Love Corporate Accounting Ltd commences operations on 1 July 2018 and presents its first statement of profit and loss and other comprehensive income and first statement of financial position on 30 June 2019. The statements are prepared before considering taxation. The Page | 5 following information is available: Statement of profit or loss and other comprehensive income for the year ended 30 June 2019 Gross Profit 730,000 Expenses Administration expenses 80,000 Salaries 200,000 Long-service Leave 20,000 Warranty expenses 30,000 Depreciation expense - plant 80,000 Insurance 20,000 430,000 Accounting profit before tax 300,000 Other comprehensive income Nil Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019 Assets Cash 20,000 Inventory 100,000 Accounts receivable 100,000 Prepaid Insurance 10,000 Plant - cost 400,000 Less: Accumulated depreciation 80,000 320,000 Total assets 550,000 Liabilities Accounts payable 80,000 Provision for warranty expenses 20,000 Loan payable 200,000 Provision for long service leave expenses 20,000 Total liabilities 320,000 Net assets 230,000 Other information All administration and salaries expenses incurred have been paid as at year end. None of the long service leave expense has actually been paid. Warranty expenses were accrued, and at year end, actual payments of $10 000 have been made (leaving an accrued balance of $20 000). Insurance was initially prepaid to the amount of $30 000. At year end, the unused component of the prepaid insurance amounted to $10 000. Amounts received from sales, including those on credit terms, are taxed at the time of sale is made. The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes. The tax rate is 30 per cent Required: Prepare Deferred Tax worksheet for I Love Corporate Accounting Ltd as at 30 June 2019 and provide the Journal entries to account for tax in accordance with AASB 112. Include supporting calculation such as Taxable Income. Question 4 (Marks 20) Assuming that Wiley & Sons Australasia Ltd acquires 70 per cent of WileyPlus Ltd for a cash price of $10 million when the share capital reserves of WileyPlus are: Share Capital Retained Earnings $8 million $2 million $10 million Required: a) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at fair value? b) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3, assuming that any non-controlling interest in the acquirer is measured at the non-controlling interest's proportionate share of the acquiree's identifiable net assets? c) What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation? Discuss your answer. Maximum 200 words. Page | 6 Question 5 (Marks 40) The following financial statements of FinalHeadache Ltd and its subsidiary Solutions Ltd have been extracted from their financial records at 30 June 2019. Reconciliation of opening and closing retained earnings Page | 7 Sales revenue Costs of goods sold Gross Profit Dividends received from Solutions Ltd Management fee revenue Gain on sale of plant Expenses Administrative expenses Depreciation Management fee expenses Other expenses Profit before tax Tax expense Profit for the year Retained earning -- 30 June 2018 Dividends paid Retained earnings at 30 June 2019 FinalHeadache Ltd ($000) 671.4 (464) 207.4 93 26.5 40 Solutions Ltd ($000) 540 (238) 302 35 (30.8) (29.5) (101.1) 205.5 (61.5) 144 319.4 463.4 (137.4) 326 (38.7) (56.8) (26.5) (72) 143 (42.2) 100.8 239.2 340 (93) 247 Statements of financial position FinalHeadache Ltd ($000) Shareholders' equity Retained earnings Share capital Current liabilities Accounts payable Tax payable Non-current liabilities Loans Current assets Accounts receivable Inventory Non-current assets Land & Buildings Plant - at cost Accumulated depreciation - plant Investment in Solutions Ltd Solutions Ltd ($000) 326 350 247 200 54.7 41.3 46.3 25 173.5 945.5 116 634.3 59.4 92 62.3 29 224 299.85 (85.75) 356 945.5 326 355.8 (138.80) 634.3 Other Information: FinalHeadache Ltd acquired its 100 per cent interest in Solutions Ltd on 1 July 2014, that is five years earlier. At that date the capital and reserves of Solutions Ltd were: Share Capital Retained Earnings $200 000 $180 000 $380 000 Page | 8 At the date of acquisition all assets were considered to be fairly valued (Thank goodness!) During the year FinalHeadache Ltd made a total sales to Solutions Ltd of $60 000, while Solutions Ltd sold $50 000 in inventory to FinalHeadache Ltd. The opening inventory in FinalHeadache Ltd as at 1 July 2018 included inventory acquired from Solutions Ltd for $40 000 that costs Solutions Ltd $30 000 to produce. The closing inventory in FinalHeadache Ltd includes inventory acquired from Solutions Ltd at a cost of $33 000. This cost Solutions Ltd $28 000 to produce Closing inventory of Solutions Ltd includes inventory acquired from FinalHeadache Ltd at a cost of $12 000. This cost FinalHeadache Ltd $10 000 to produce. On 1 July 2018 Solutions Ltd sold an item of plant to FinalHeadache Ltd for $116 000 when its carrying value in Solutions Ltd's account was $81 000 (cost $135 000, accumulated depreciation $54 000). This plant is assessed as having a remaining useful life of six years. The Group has a policy of measuring its property, plant and equipment using the 'cost model'. Solutions Ltd paid $26 500 in management fee to FinalHeadache Ltd. The tax rate is 30 per cent Required: Prepare the following for FinalHeadache Ltd and Solutions Ltd as at 30 June 2019: Acquisition analysis to recognise Goodwill or Gain from Bargain Purchase show supporting calculations All relevant worksheet entries o Pre-acquisition eliminating entries o Intercompany eliminating entries Consolidated worksheet for FinalHeadache Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts Consolidated statement of profit or loss of FinalHeadache Group Consolidated statement of financial position of FinalHeadache Group