Task:
Assignment instructions: This assignment can be completed using either Word or Excel. Please ensure that your file name contains your student ID and your full name. If you are using Excel please use a separate sheet within the one file for each assignment part (a), (b) and (c). A list of entries are not required, however I recommend you prepare these as part of your workings before attempting the worksheet. These can also be submitted however marks will not be allocated. Please ensure that you use the ‘Ref’ column in the worksheet to identify each separate consolidation entry.
Case study:
On 1 July 2018, Joel Ltd acquired all the shares of Billy Ltd for $425 000 on an ex-div. basis. On this date, the equity and liabilities of Billy Ltd included the following balances:
|
Share capital |
$100,000 |
|
General reserve |
25,000 |
|
Retained earnings |
145,000 |
|
Dividend Payable |
8,000 |
At acquisition date, all the identifiable assets and liabilities of Billy Ltd were recorded at
amounts equal to fair value except for:
|
|
Carrying amount |
Fair value |
|
Plant and equipment (cost $500,000) |
$400,000 |
$404,000 |
|
Patent |
200,000 |
210,000 |
|
Inventories |
30,000 |
40,000 |
|
Land |
50,000 |
70,000 |
|
Machinery (cost $120,000) |
90,000 |
91,000 |
The plant and equipment had a useful life of 5 years at acquisition date and was expected to be used evenly over that time. The patent was considered to have an indefinite life. The machinery had a further 4-year useful life at acquisition date. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation.
During the year ended 30 June 2019, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2020. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.
(Continued on next page)
Additional information
The corporate tax rate is 30%.
Required:
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