this is the preparation of a selection of consolidation journal entries for aneconomic entity comprising a parent and a subsidiary
Part A Cassie Ltd (Cassie) acquired all issued share capital of Cotter Ltd (Cotter) on 1 July 2019 for a cash payment of $1,100,000. The share capital and retained earnings of Cotter at the date of acquisition were: Share capital $600,000 Retained earnings $250,000 At the date of acquisition all assets and liabilities of Cotter were carried at fair values with the exception of the following assets: Carrying amount Fair value Plant (cost $110 000) $90,000 $100,000 Land $110,000 $160,000 The plant had a further 10-year useful life as at the date of acquisition. The land was intended to hold for further use. There were no intra-group transactions between Cassie and Cotter between 1 July 2019 and 30 June 2021. On 1 March 2022 Cotter sold a machinery to Cassie for $145,000 when its carrying value in Cotter' books was $100,000 (original cost $200,000 and original estimated life of 8 years). There were no other intra-group transactions between Cassie and Cotter for year ended 30 June 2022. During January and May in 2023, Cassie made sales of inventory to Cotter for on-sale to external parties. The inventory had originally cost Cassie $40,000. At 30 June 2023, Cotter still had half of the inventory on hand. On-hand inventory was expected to be sold in the subsequent financial year. There were no other intro-group transactions between Cassie and Cotter for year ended 30 June 2023. Cassie incurred the following transactions with Cotter for year ended 30 June 2024: Cassie made sales of inventory to Cotter of $60,000, while Cotter sold $50,000 of inventory to Cassie. Closing inventories on 30 June 2024 included the following amounts: Cassie $25,000 (bought from Cotter) and Cotter $30,000 (bought from Cassie) Cotter has several long-lem loans, including a five-year loan for $45,000 from Cassie. This intra-group loan was effective from 1 July 2023. Interest rate was 3.5% per annum. During the year ending 30 June 2024, Cotter paid S1000 interest on this loan. Cassic provided management consultation to Cotter and this was the first time that Cassie provided such service to Cotter. At the end of 2024, Cotter paid $3,000 for these services and has a balance of $1,000 payable at year end. I. You were requested to prepare the followings: acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2019. IL adjustment/elimination journal entries for consolidation as at 30 June 2023 III. adjustment/elimination journal entries for consolidation as at 30 June 2024. After meeting with your supervisor, you gathered the following information which you might need to complete your work: Cassie declared dividends $55,000 and paid dividends $35,000. Cotter declared and paid dividends $20,000, Management team of Cassie believes that goodwill acquired from business combination was impaired by $10,000 in 2022, S15,000 in 2023 and S30,000 in 2024. There was no impairment in 2020 and 2021. Cassie has the following accounting policies for the group: Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary. All plants and machineries are depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the asset is held in the relevant year. Intragroup sales of inventory to be at a mark-up of 10% on cost. All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements. The company tax rate is 30% and this rate has not changed for several years. Reporting date is 30 June Journal narrations are required. Number cach year consolidation elimination/adjusting journal entries by 1, 2, 3, ..., etc. Where more than one journal entry is needed for an event to be completely accounted for add the letters a,b,c ..etc to them as necessary. Part A Cassie Ltd (Cassie) acquired all issued share capital of Cotter Ltd (Cotter) on 1 July 2019 for a cash payment of $1,100,000. The share capital and retained earnings of Cotter at the date of acquisition were: Share capital $600,000 Retained earnings $250,000 At the date of acquisition all assets and liabilities of Cotter were carried at fair values with the exception of the following assets: Carrying amount Fair value Plant (cost $110 000) $90,000 $100,000 Land $110,000 $160,000 The plant had a further 10-year useful life as at the date of acquisition. The land was intended to hold for further use. There were no intra-group transactions between Cassie and Cotter between 1 July 2019 and 30 June 2021. On 1 March 2022 Cotter sold a machinery to Cassie for $145,000 when its carrying value in Cotter' books was $100,000 (original cost $200,000 and original estimated life of 8 years). There were no other intra-group transactions between Cassie and Cotter for year ended 30 June 2022. During January and May in 2023, Cassie made sales of inventory to Cotter for on-sale to external parties. The inventory had originally cost Cassie $40,000. At 30 June 2023, Cotter still had half of the inventory on hand. On-hand inventory was expected to be sold in the subsequent financial year. There were no other intro-group transactions between Cassie and Cotter for year ended 30 June 2023. Cassie incurred the following transactions with Cotter for year ended 30 June 2024: Cassie made sales of inventory to Cotter of $60,000, while Cotter sold $50,000 of inventory to Cassie. Closing inventories on 30 June 2024 included the following amounts: Cassie $25,000 (bought from Cotter) and Cotter $30,000 (bought from Cassie) Cotter has several long-lem loans, including a five-year loan for $45,000 from Cassie. This intra-group loan was effective from 1 July 2023. Interest rate was 3.5% per annum. During the year ending 30 June 2024, Cotter paid S1000 interest on this loan. Cassic provided management consultation to Cotter and this was the first time that Cassie provided such service to Cotter. At the end of 2024, Cotter paid $3,000 for these services and has a balance of $1,000 payable at year end. I. You were requested to prepare the followings: acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2019. IL adjustment/elimination journal entries for consolidation as at 30 June 2023 III. adjustment/elimination journal entries for consolidation as at 30 June 2024. After meeting with your supervisor, you gathered the following information which you might need to complete your work: Cassie declared dividends $55,000 and paid dividends $35,000. Cotter declared and paid dividends $20,000, Management team of Cassie believes that goodwill acquired from business combination was impaired by $10,000 in 2022, S15,000 in 2023 and S30,000 in 2024. There was no impairment in 2020 and 2021. Cassie has the following accounting policies for the group: Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary. All plants and machineries are depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the asset is held in the relevant year. Intragroup sales of inventory to be at a mark-up of 10% on cost. All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements. The company tax rate is 30% and this rate has not changed for several years. Reporting date is 30 June Journal narrations are required. Number cach year consolidation elimination/adjusting journal entries by 1, 2, 3, ..., etc. Where more than one journal entry is needed for an event to be completely accounted for add the letters a,b,c ..etc to them as necessary
