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The following financial statements of Artificial Ltd and its subsidiary Intelligence Ltd have been extracted from their financial records at 3 0 June 2 0
The following financial statements of Artificial Ltd and its subsidiary Intelligence Ltd have been extracted from their financial records at June
The accounts of the two companies are presented below.
Artificial Ltd
$ Intelligence Ltd
$
Sales
Cost of goods sold
Gross profit
Dividends revenue
Management fee revenue
Gain on sale of plant
Less Expenses
Administrative expenses
Depreciation
Management fee expense
Other expenses
Profit before tax
Tax expense
Profit after tax
Retained earnings July
Dividends paid
Retained earnings June
Statement of financial position Artificial Ltd
$ Intelligence Ltd
$
Shareholders equity
Retained earnings
Share capital
Liabilities
Accounts payable
Tax payable
Noncurrent liabilities
Loans
Assets
Accounts receivable
Inventory
Noncurrent assets
Land and buildings
Plant at cost
Accumulated depreciation
Investment in Intelligence Ltd
Other information:
Artificial Ltd acquired its percent interest in Intelligence Ltd on July seven years earlier. The cost of the investment was $ At that date the capital and reserves of Intelligence Ltd were: $
Share capital
Retained earnings
At the date of acquisition all assets were considered to be fairly valued.
In applying the impairment test for goodwill in the current year, the directors have determined that a writedown of $ is required for consolidation purposes. The cumulative goodwill impairment writedowns for prior years amounted to $
During the year Artificial Ltd made total sales to Intelligence Ltd of $ while Intelligence Ltd sold $ in inventory to Artificial Ltd
The opening inventory in Artificial Ltd at July included inventory acquired from Intelligence Ltd for $ that cost Intelligence Ltd $ to produce.
The closing inventory in Artifical Ltd includes inventory acquired from Intelligence at a cost of $ This cost Inteligence Ltd $ to produce.
The closing inventory of Intelligence Ltd includes inventory acquired from Artificial Ltd at a cost of $ This cost Artificial Ltd $ to produce.
An item of plant and equipment owned by Artificial Ltd was sold to Intelligence Ltd on July for $ when its carrying amount was $cost $ accumulated depreciation of $ 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
Intelligence paid management fees to Artificial Ltd
The tax rate is
Required
Prepare an acquisition analysis.
Prepare the consolidation journal entries necessary to prepare consolidated accounts for the year ending June for the group comprising Artificial Ltd and Intelligence Ltd Provide a brief explanation lines for each of the consolidation journal entries, explaining why the entry is being made.
Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended June Prepare the consolidated statement of profit or loss only for the year ended June
Following consolidation, should dividends paid to the parent entity by its subsidiaries be shown in the economic entitys financial statements? In the consolidated financial statements, which dividends would be shown?
If a subsidiary sells inventory to the parent entity and some of the inventory is still on hand at year end, what adjustments are necessary at year end? Further, will adjustments be required to restate the balance of opening inventory as at the beginning of the next financial period?
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