Using the information below and on the next two pages, prepare the following as at 30th June 2014:

PART A: Consolidation adjustment/elimination journal entries that are required at the above financial year end date (i.e. for one year only); and

PART B: A detailed calculation of non-controlling interest balance and consolidation worksheet; and

PART C: Consolidated financial statements and statements of changes in equity for both the the group and parent.

THE FOLLOWING EVENTS OCCURRED:

During the year ended 30 June 2012:

1. On 17 October 2011 Sydney Ltd created a group entity when it purchased 90% of the issued capital of Tower Ltd for $289,980 cash. On acquisition,TowerLtds accounts showed: Share capital $200,000 and Retained earnings $58,000. All assets and liabilities appearing in TowerLtds financial statements were fairly valued, except:

• One of their blocks of land was recorded at $100,000 when its fair value was judged by the group to be $130,000. During the following financial year this land was sold for $140,000 cash.
• An item of plant was undervalued by $50,000. At that time it had a remaining life of 5 years and accumulated depreciation of $36,000. The plant is still an asset of Tower Ltd at 30 June 2014.
• A contingent liability relating to an unsettled legal claim with a fair value of $50,000 was recorded in the notes to the financial statements. This amount will be tax deductible when paid. The court case is still in progress at 30 June 2014.

During the year ended 30 June 2013:

1. On 1 July 2012 Tower Ltd sold an item of plant to Sydney Ltd for $59,000. This was financed by a short-term interest-free loan from Tower Ltd that was repaid 14 months later. The plant had cost $64,000 when purchased on 13November 2011. Its expected useful life was originally 5 years and this original estimate is still considered to be valid. The plant is still an asset of Sydney Ltd at 30 June 2014.
2. During the year Sydney Ltd made sales of inventory to Tower Ltd of $569,600. The inventory balance ofTower Ltd at the end of the year included stock of $84,000 acquired from Sydney Ltd. Sydney Ltd declared and paid dividends of $90,000 for the year. Tower Ltd did not declare or pay any dividends for the year.

During the year ended 30 June 2014:

1. On 23 December 2013Sydney Ltd sold an item of plant to Tower Ltd for $100,000 when its carrying value in Sydneys books was $170,000 (original cost $212,500 and original estimated life of 10 years). The plant is still an asset of Tower Ltd at 30 June 2014.
2. During the year Tower Ltd made sales of inventory to Sydney Ltd of $88,200.The inventory balance of Sydney Ltd at the end of the year included stock of $54,300 acquired from Tower Ltd.
3. The management of Sydney Ltd believes that the goodwill acquired on acquisition of Tower Ltd was impaired by $5,000 in the current year. This is in addition to a total of $8,000 of impairment in previous years.
4. Sydney Ltd charged management fees to Tower Ltd.
5. Dividends were declared/paid by both companies.
6. Non-controlling interests in Tower Ltd to be recognised. This is the only subsidiary in the group.

ADDITIONAL INFORMATION:

• The company tax rate is currently 30% and it has been this rate for many years.
• SydneyLtd has the following accounting policies for the group:

(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books ofany subsidiary;

(ii) Non-controlling interests are measured at fair value;

(iii) Intragroup sales of inventory to be at a selling price of cost plus a mark-up of 50%;

(iv) Plant is depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of days the asset is held in the relevant year, with the day of acquisition counting as one day while the day of disposal does not count; and

(v) 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.

NOTE:

• You MUST number your journal entries and present them in the order as they relate to the number given for each event. Where more than one journal is needed for an event to be completely accounted for add the letters a,b,c,etc to them as necessary. [For example, if three separate journal entries are required to fully record the information detailed in point number 1, then the first journal will be 1a and the second is to be 1b and the third 1c.] Short narrations are expected for each journal entry. Marks will be lost if journals are not presented in a clear and professional manner (i.e. poor or unclear presentation can include showing the debit entry on one page but the credit entry on another, or not clearly distinguishing between debit and credit entries).
• The required statements for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Follow the formats shown in Chapter 29 of the textbook. Notes to the statements are not required. Marks will be lost if statements are not presented in a clear and professional manner (i.e. poor or unclear presentation can include splitting the reports over two pages, so start each statement on a new page!).
• You may cut and paste the financial information on the next page into your excel file, but no other information is to be copied into your file from anywhere else.
• You are expected to use at least the basic formula functions in Excel when preparing worksheets and financial statements (i.e. use Excel formulas to add totals and sub-totals etc, rather than calculating values manually and then just typing them in to the spreadsheet!).
• This is the final unit in the accounting major where you will have to produce complex journal entries and financial reports at a professional level. Therefore, a very high standard is expected. Approach it as if you are preparing it for your employer. The reports cannot be late for the board meeting and the direrctors carefully review all of the information you give them. They pay you well, but they expect quality work. It needs to be technically correct and presented well, otherwise you will need to look for another job!!!

AT 30 JUNE 2014	SYDNEY LTD	TOWER LTD
	$	$
INCOME STATEMENTS
Sales revenue	1,365,300	992,200
Cost of goods sold	692,000	618,500
Gross profit	673,300	373,700
Other income
Management fee revenue	12,900	-
Dividend revenue	87,960	-
Expenses
Depreciation expense	(133,300)	(59,000)
Management fee expense	-	(12,900)
Loss on sale of asset	(70,000)	-
Other expenses	(426,200)	(163,400)
Profit before tax	144,660	138,400
Income tax expense	(17,010)	(41,520)
Profit for the year after tax	127,650	96,880
Retained earnings at start of year	159,220	134,320
Dividend paid/declared	(75,000)	(96,400)
Retained earnings at end of year	211,870	134,800
BALANCE SHEETS
Equity
Share capital	450,000	200,000
Retained earnings	211,870	134,800
Current Liabilities
Accounts payable	210,280	148,180
Income tax payable	10,910	42,420
Dividends payable	37,500	48,200
Non-Current Liabilities
Bank Loans	710,000	650,000
Provision for employee benefits	29,100	14,300
Deferred tax liability	6,100	-
	1,665,760	1,237,900
Current Assets
Accounts receivable	176,800	98,700
Allowance for doubtful debts	(22,100)	(9,500)
Dividends receivable	43,980	-
Inventory	98,300	121,200
Non-Current Assets
Land and buildings	790,000	910,800
Plant at cost	449,700	301,200
Accumulated depreciation plant	(169,400)	(185,400)
Deferred tax asset	-	900
Shares in The Rocks Pty Ltd	8,500	-
Investment in Tower Ltd	289,980	-
	1,665,760	1,237,900