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

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

EMU Ltd ($)

Cassowary Ltd ($)

Detailed reconciliation

of opening and closing

retained earnings

Sales revenue

1 725 000

1 450 000

Cost of goods sold

(1 160 000)

(595 000)

Gross profit

565 000

855 000

Dividend revenuefrom Cassowary Ltd

186 000

Management fee revenue

66 250

Profit on sale of plant

87 500

Expenses:

Administrative expenses

(77 000)

(96 750)

Depreciation

(61 250)

(142 000)

Management fee expense

(66 250)

Other expenses

(252 750)

(192 500)

Profit before tax

513 750

357 500

Tax expense

153 750

105 500

Profit for the year

360 000

252 000

Retained earnings1 July 2018

798 500

598 000

1 158 500

850 000

Dividends paid

(343 500)

(232 500)

Retained earnings30 June 2019

815 000

617 500

Statement of financial

position

Shareholders equity:

Retained earnings

815 000

617 500

Share capital

875 000

500 000

Current liabilities:

Accounts payable

136 750

115 750

Tax payable

103 250

62 500

Non-current liabilities:

Loans

433 750

290 000

2 363 750

1 585 750

Current assets:

Accounts Receivable

148 500

155 750

Inventory

230 000

72 500

Non-current assets:

Land and buildings

560 000

815 000

Plant at cost

749 625

889 500

Accumulated depreciation

(214 375)

(347 000)

Investment in Cassowary Ltd

890 000

2 363 750

1 585 750

Additional information:

  1. EMU Ltd had acquired its 80 per cent interest in Cassowary Ltd on 1 July 2010, that is, nine

years earlier. At that date the capital and reserves of Cassowary Ltd were:

Share capital $500 000

Retained earnings $425 000

Total $925 000

At the date of acquisition all assets were considered to be fairly valued.

  1. The management of EMU Ltd measures any non-controlling interest at the proportionate share of Cassowary Ltds identifiable net assets.

  1. During the year, EMU Ltd made total sales to Cassowary Ltd Ltd of $162 500, while Cassowary Ltd sold $130 000 in inventory to EMU Ltd.

  1. The opening inventory in EMU Ltd as at 1 July 2018 included inventory acquired from Cassowary Ltd of $105 000 that had cost Cassowary Ltd $87 500 to produce.

  1. The closing inventory in EMU Ltd includes inventory acquired from Cassowary Ltd at a cost of $84 000. This had cost Cassowary Ltd $70 000 to produce.

  1. The closing inventory of Cassowary Ltd includes inventory acquired from EMU Ltd at a cost of $30 000. This had cost EMU Ltd $24 000 to produce.

  1. The management of EMU Ltd believe that goodwill acquired was impaired by $7500 in the

current financial year. Previous impairments of goodwill amounted to $56 250.

  1. On 1 July 2018 EMU Ltd sold an item of plant to Cassowary Ltd for $290 000 when its carrying value in EMU Ltds accounts was $202 500 (cost of $337 500, accumulated depreciation of $135 000). This plant is assessed as having a remaining useful life of six years.

  1. Cassowary Ltd paid $66 250 in management fees to EMU Ltd.

  1. The tax rate is 30 per cent.

REQUIRED:

  1. Calculate goodwill on acquisition. (5 marks)
  2. Prepare all consolidation journal entries including non-controlling interest. (17.5 Marks)
  3. Prepare consolidation worksheet. (10.5 Marks)
  4. Prepare consolidated statement of profit and loss and other comprehensive income of EMU ltd and its subsidiary for the year ended 30 June 2019. (5 marks)
  5. Prepare consolidated statement financial position of EMU Ltd and its subsidiaries as at 30 June 2019. (5 marks)
  6. Prepare EMU Ltd and its controlled entity Consolidated statement of changes in equity for the year ended 30 June 2019. (5 marks)
  7. Prepare EMU Ltd Statement of changes in equity for the year ended 30 June 2019. (5 marks)

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