diff_months: 13

Consolidation Entries Statement Assignment

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Added on: 2023-05-10 13:20:04
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Question Task Id: 0
  • Country :

    Australia

Jonathan Ltd acquired all the issued shares (ex-div.) of Thomas Ltd on 1 July 2020 for $246 000. At this date the equity of Thomas Ltd consisted of: 

Share Capital= $130,000
 General Reserve=$50,000
Retained Earnings= $50,000

At the acquisition date all the identifiable assets and liabilities of Thomas Ltd consisted of: 

  Carrying Amount Fair Value
Plant (Cost $230,000) $200,000 $210,000
Land $100,000 $120,000
Inventories $30,000 $38,000

The inventories were all sold by 30 June 2020. The land was sold on 1 February 2021 for $150 000. The plant was considered to have a further 5-year life. The plant was sold for $155 000 on 1 January 2022. Also, at acquisition date Thomas Ltd had recorded a dividend payable of $7000 and goodwill (net of accumulated impairment losses of $13 000) of $5000. Thomas Ltd had not recorded some internally generated brands that Jonathan Ltd considered to have a fair value of $12 000. The brand was considered to have an indefinite life. Also not recorded by Thomas Ltd was a contingent liability relating to a current court case in which Thomas Ltd was involved and a supplier was seeking compensation. Jonathan Ltd placed a fair value of $15 000 on this liability. This court case was settled in May 2022 at which time Thomas Ltd was required to pay damages of $16 000. 

In February 2021, Thomas Ltd transferred $20 000 from the general reserve on hand at 1 July 2020 to retained earnings. A further $15 000 was transferred in February 2022. 

Both companies have an equity account entitled 'Other components of equity' to which certain gains and losses from financial assets are taken. At 1 July 2021, the balances of these accounts were $30 000 (Jonathan Ltd) and $15 000 (Thomas Ltd). The financial statements of the two companies at 30 June 2022 contained the following information: 

 tax1-1683722640.jpg

  1. Calculate acquisition analysis as at 1 July 2020.

    Net Fair Value of Identifiable Assets & Liabilities of Thomas Ltd = ($130,000 + $50,000 + $40,500) (equity) + $8,000 (1 – 30%) (inventory) + $10,000 (1 – 30%) (plant) + $20,000 (1 – 30%) (land) + $12,000 (1 – 30%) (internally generated brand) - $15,000 (1 – 30%) (provision for damages) - $5,000 (goodwill) = $220,500 + $5,600 + $7,000 + $14,000 + $8,400 - $10,500 - $5000 = $240,000
    Consideration transferred = $246,000
    Goodwill = $246,000 - $240,000 = $6,000
    Goodwill Recorded = $5,000
    Unrecorded Goodwill = $1,000

  2. Prepare the consolidation journal entries for 30 June 2022.
  3. Complete the consolidated worksheet for 30 June 2022
  4. Prepare the consolidated financial statements at 30 June 2022
  5. Write a report to explain the consolidation process as per AASB10 for wholly owned entities.

tax2-1683722646.jpg

  • Uploaded By : Katthy Wills
  • Posted on : May 10th, 2023
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