Required: (a) Prepare the acquisition analysis of the Investment in Cassano Ltd as at 1 January 2017.

(b) Prepare consolidation worksheet journal entries necessary to consolidate Vincenzo Ltd and its subsidiary for the financial year ended 30 April 2021, in accordance with AASB 3/IFRS 3 Business Combinations and AASB 10/IFRS 10 Consolidated Financial Statements: (i) Fair value adjustments upon consolidation (RSROC entries) (ii) Pre-acquisition entries (iii) Elimination of intragroup transactions (iv) NCI adjustments

Show all workings. Narrations are not required. Use three decimal places for discount factor related calculations.

On 1 January 2017, Vincenzo Ltd acquired 75% of the issued shares of Cassano Ltd on an ex-div. basis for $5 million. On the acquisition date, the accounts of Cassano Ltd included the following balances: Share capital ordinary shares ($1.50 share) $ 1,500,000 800,000 1,000,000 Retained earnings 980,000 100 000 General reserve Gold reserve Goodwill At the acquisition date, all the identifiable assets and liabilities of Cassano Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair value 1 Plant and machinery (Cost = $800,000) $655,000 $ 880,000 2 Customer contracts 60,000 230,000 The plant and machinery are expected to have a further useful life of 20 years. The customer contracts have a 15 years life of which 9 years remain. The subsidiary constructed an underground power generator in a designated rural area with an estimated useful life of 10 years at the acquisition date. It is required by the local government to dismantle the plant, remove it and return the site to its original condition. Cassano Ltd estimated these costs to be: Dismantling the plant $100,000 Environmental remediation costs $170,000 Replacement of flora and fauna $20,000 $290,000 [The discount rate applicable to Cassano Sdn Bhd's credit risk profile is 12%] An extract of the financial information of Vincenzo Ltd and Cassano Ltd for the financial year ended 30 April 2021 showed the following financial information: Vincenzo Ltd Cassano Ltd Share capital - ordinary shares $ 3,150,000 $ 1,500,000 Retained earnings (at 30/4/2021) 1,895,814 1,530,500 Retained earnings (at 1/5/2020) 1,357,075 1,150,000 Gold reserve 445,000 1,200,000 General reserve 2,100,000 300,000 Diamond reserve 350,000 Interim dividends paid 300,000 402,500 Profit for the year 1,688,739 283,000 Investment in Cassano Ltd 5,000,000 Fair value of non-controlling interest (at 1/1/2017) 1,200,000 Additional information: (0) The opening inventories of Vincenzo Ltd on 1 May 2020 included items purchased from Cassano Ltd for $510,000, that had cost Cassano Ltd $250,000 to make. 70% of these inventories was sold to Zoey Ltd by the current financial year end. (m) Vincenzo Ltd charges Cassano Ltd $3,000 per month in rental of a warehouse since 1 July 2017. Cassano Ltd has not paid Vincenzo Ltd 5 months of rental in the current financial year. (iii) On 1 July 2017, Vincenzo Ltd provided some advances and loans to Cassano Ltd of $680,000 for working capital purposes. The interest of 13% per annum on the advances and loans are recorded on an accrual basis and are payable bi-annually at the end of every June and December. In the previous financial year, the subsidiary had repaid Vincenzo Ltd an amount of $200,000. (iv) Cassano Ltd sold inventories to Vincenzo Ltd for $430,000, at a cost plus 25% pricing basis on 2 December 2020. An amount of $180,000 of these inventories were still on hand as at year end. (v) Vincenzo Ltd sold inventories to Cassano Ltd for $80,000 that had cost Vincenzo Ltd $110,000 to make. At year end, half of these inventories were still on hand. (vi) On 1 March 2018, Cassano Ltd sold an equipment to Vincenzo Ltd for $330,000 when it was purchased for $550,000 on the day itself. The equipment has a further useful life of 10 years with an estimated useful life of $20,000. The Group depreciates its equipment using straight-line depreciation method. (vii) Goodwill is tested on an annual basis for impairment. Previously, the directors of the Group estimated that 15% of the total purchased goodwill was impaired in the third financial year of acquisition. It was later decided that it had a further 10% impairment in the current financial year. (vii) The constitution of the Group allows directors to declare dividends at any time and this is not subject to any approval, authorization or discretion. The tax rate is 24%. Vincenzo Ltd uses the full goodwill method to prepare its consolidated financial statements in compliance with AASB 3/IFRS 3 Business Combinations and AASB 10/IFRS 10 Consolidated Financial Statements. Any adjustments for differences between carrying amounts at the acquisition date and fair values are made on consolidation. Revaluation surplus recognized on consolidation (RSROC) is created for fair value adjustments at Group level which are transferred to retained earnings when assets are sold or fully consumed. The full effects of intragroup transactions are eliminated upon consolidation Required: (a) Prepare the acquisition analysis of the Investment in Cassano Ltd as at 1 January 2017. (5.5 marks) (b) Prepare consolidation worksheet journal entries necessary to consolidate Vincenzo Ltd and its subsidiary for the financial year ended 30 April 2021, in accordance with AASB 3/IFRS 3 Business Combinations and AASB 10/IFRS 10 Consolidated Financial Statements: (0) Fair value adjustments upon consolidation (RSROC entries) (1) Pre-acquisition entries (ii) Elimination of intragroup transactions (iv) NCI adjustments Show all workings. Narrations are not required. Use three decimal places for discount factor related calculations. (29.5 marks) (Question 3 = 5.5+ 29.5 = 35 marks) Acronyms to be allowed to be used: RSROC = Revaluation surplus recognised on consolidation FV = Fair value DTA = Deferred tax assets DTL = Deferred tax liabilities ITE = Income tax expense ORE = Retained earnings bif Acc. = Accumulated NCI = Non-controlling interest FVINA = Fair value of identifiable net assets BVINA = Book value of identifiable net assets FVC = Fair value of consideration Depn = Depreciation On 1 January 2017, Vincenzo Ltd acquired 75% of the issued shares of Cassano Ltd on an ex-div. basis for $5 million. On the acquisition date, the accounts of Cassano Ltd included the following balances: Share capital ordinary shares ($1.50 share) $ 1,500,000 800,000 1,000,000 Retained earnings 980,000 100 000 General reserve Gold reserve Goodwill At the acquisition date, all the identifiable assets and liabilities of Cassano Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair value 1 Plant and machinery (Cost = $800,000) $655,000 $ 880,000 2 Customer contracts 60,000 230,000 The plant and machinery are expected to have a further useful life of 20 years. The customer contracts have a 15 years life of which 9 years remain. The subsidiary constructed an underground power generator in a designated rural area with an estimated useful life of 10 years at the acquisition date. It is required by the local government to dismantle the plant, remove it and return the site to its original condition. Cassano Ltd estimated these costs to be: Dismantling the plant $100,000 Environmental remediation costs $170,000 Replacement of flora and fauna $20,000 $290,000 [The discount rate applicable to Cassano Sdn Bhd's credit risk profile is 12%] An extract of the financial information of Vincenzo Ltd and Cassano Ltd for the financial year ended 30 April 2021 showed the following financial information: Vincenzo Ltd Cassano Ltd Share capital - ordinary shares $ 3,150,000 $ 1,500,000 Retained earnings (at 30/4/2021) 1,895,814 1,530,500 Retained earnings (at 1/5/2020) 1,357,075 1,150,000 Gold reserve 445,000 1,200,000 General reserve 2,100,000 300,000 Diamond reserve 350,000 Interim dividends paid 300,000 402,500 Profit for the year 1,688,739 283,000 Investment in Cassano Ltd 5,000,000 Fair value of non-controlling interest (at 1/1/2017) 1,200,000 Additional information: (0) The opening inventories of Vincenzo Ltd on 1 May 2020 included items purchased from Cassano Ltd for $510,000, that had cost Cassano Ltd $250,000 to make. 70% of these inventories was sold to Zoey Ltd by the current financial year end. (m) Vincenzo Ltd charges Cassano Ltd $3,000 per month in rental of a warehouse since 1 July 2017. Cassano Ltd has not paid Vincenzo Ltd 5 months of rental in the current financial year. (iii) On 1 July 2017, Vincenzo Ltd provided some advances and loans to Cassano Ltd of $680,000 for working capital purposes. The interest of 13% per annum on the advances and loans are recorded on an accrual basis and are payable bi-annually at the end of every June and December. In the previous financial year, the subsidiary had repaid Vincenzo Ltd an amount of $200,000. (iv) Cassano Ltd sold inventories to Vincenzo Ltd for $430,000, at a cost plus 25% pricing basis on 2 December 2020. An amount of $180,000 of these inventories were still on hand as at year end. (v) Vincenzo Ltd sold inventories to Cassano Ltd for $80,000 that had cost Vincenzo Ltd $110,000 to make. At year end, half of these inventories were still on hand. (vi) On 1 March 2018, Cassano Ltd sold an equipment to Vincenzo Ltd for $330,000 when it was purchased for $550,000 on the day itself. The equipment has a further useful life of 10 years with an estimated useful life of $20,000. The Group depreciates its equipment using straight-line depreciation method. (vii) Goodwill is tested on an annual basis for impairment. Previously, the directors of the Group estimated that 15% of the total purchased goodwill was impaired in the third financial year of acquisition. It was later decided that it had a further 10% impairment in the current financial year. (vii) The constitution of the Group allows directors to declare dividends at any time and this is not subject to any approval, authorization or discretion. The tax rate is 24%. Vincenzo Ltd uses the full goodwill method to prepare its consolidated financial statements in compliance with AASB 3/IFRS 3 Business Combinations and AASB 10/IFRS 10 Consolidated Financial Statements. Any adjustments for differences between carrying amounts at the acquisition date and fair values are made on consolidation. Revaluation surplus recognized on consolidation (RSROC) is created for fair value adjustments at Group level which are transferred to retained earnings when assets are sold or fully consumed. The full effects of intragroup transactions are eliminated upon consolidation Required: (a) Prepare the acquisition analysis of the Investment in Cassano Ltd as at 1 January 2017. (5.5 marks) (b) Prepare consolidation worksheet journal entries necessary to consolidate Vincenzo Ltd and its subsidiary for the financial year ended 30 April 2021, in accordance with AASB 3/IFRS 3 Business Combinations and AASB 10/IFRS 10 Consolidated Financial Statements: (0) Fair value adjustments upon consolidation (RSROC entries) (1) Pre-acquisition entries (ii) Elimination of intragroup transactions (iv) NCI adjustments Show all workings. Narrations are not required. Use three decimal places for discount factor related calculations. (29.5 marks) (Question 3 = 5.5+ 29.5 = 35 marks) Acronyms to be allowed to be used: RSROC = Revaluation surplus recognised on consolidation FV = Fair value DTA = Deferred tax assets DTL = Deferred tax liabilities ITE = Income tax expense ORE = Retained earnings bif Acc. = Accumulated NCI = Non-controlling interest FVINA = Fair value of identifiable net assets BVINA = Book value of identifiable net assets FVC = Fair value of consideration Depn = Depreciation