Using the information below and the financial statementson the following page, prepare the following at 30 June 2013:
A. adjustment/elimination journal entries for consolidation (10 marks); and
B. consolidation worksheetand detailed calculation of non-controlling interest balance (5 marks); and
C. consolidated financial statements and statements of changes in equity of Platypus Limited and its controlled entities (5 marks).
1. On 1 January 2007 Platypus Ltd purchased 100% of the issued capital of Emu Ltd for $650,000 cash. On acquisition Emu Ltd accounts showed: Share capital $700,000 and Retained earnings $159,000. All assets and liabilities were recorded at fair value except for land that was undervalued by $80,000.
2. On 1 July 2008Platypus Ltd and Emu Ltd each acquired 35% of the issued capital of Koala Ltd for a combined total of $400,000 cash. The balance sheet of Koala Ltd at the acquisition date showed: Share capital $250,000 and Retained earnings $56,000. All assets and liabilities were recorded at fair value except foran item of plant that was undervalued by $30,000. At that time the plant had a remaining life of 6 years and accumulated depreciation of $24,000. The plant was still on hand at 30 June 2013.
For the year ended 30 June 2013:
3. On 1 July 2012Koala Ltd sold an item of plant to Emu Ltd for $72,750 when its carrying value in Koala’s books was $69,000 (original cost $110,400 and original estimated life of 12 years).
4. The opening inventory on 1 July 2012 in Platypus Ltd included stock of $29,000 acquired from Emu Ltd.
5. During the year Emu Ltd made sales of inventory to Koala Ltd of $116,000, while Koala Ltd sold $184,000 of inventory to Platypus Ltd.
6. Closing inventories on 30 June 2013 included the following: Platypus Ltd $55,000 (bought from Koala Ltd) and Koala Ltd $28,000 (bought from Emu Ltd).
7. Platypus Ltd charged management fees to both Emu Ltd and Koala Ltd. Emu Ltd also charged management fees to Koala Ltd.
8. Dividends were declared/paid by the three companies.
|AT 30 JUNE 2013||PLATYPUS LTD||EMU LTD||KOALA LTD|
|Cost of goods sold||798,000||538,060||427,400|
|Management fee revenue||22,600||21,000||–|
|Gain on sale of plant||–||–||3,750|
|Management fee expense||–||(12,600)||(31,000)|
|Profit before tax||408,550||172,590||7,350|
|Income tax expense||(127,200)||(50,050)||(2,400)|
|Profit for the year after tax||281,350||122,540||4,950|
|Retained earnings at start of year||659,100||434,000||243,900|
|Retained earnings at year end||690,450||370,540||143,850|
|Income tax payable||125,900||66,700||2,600|
|Provision for employee benefits||19,200||15,700||12,900|
|Provision for employee benefits||21,900||19,400||14,100|
|Deferred tax liability||6,900||9,700||–|
|Allowance for doubtful debts||(15,500)||(7,000)||(4,200)|
|Land and buildings||800,000||610,800||652,000|
|Plant – at cost||901,200||601,200||699,600|
|Accumulated depreciation – plant||(294,900)||(194,400)||(297,600)|
|Deferred tax asset||–||–||1,700|
|Investment in Emu Ltd||650,000||–||–|
|Investment in Koala Ltd||200,000||200,000||–|
9. Non-controlling interests to be recognised.
10. Platypus Ltd has the following accounting policies which have been in place for the groupfor many years: (i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of the subsidiary; (ii) Non-controlling interest is measured at fair value; (iii) Intragroup sales of inventory to be at a markup of 25% on cost; (iv) Plant is depreciated straight-line over its estimated life, with no residual value; and (v) all amounts to be recorded to the nearest whole dollar.
11. The company tax rate is currently 30% and it has been this rate for many years.
· You MUST number journal entries as they relate to the point numbers given in the information below. Where more than one journal is needed, add the letters a,b,c,…etc to them. That is, if two journals are required to record the acquisition detailed in information point 1, then the first journal will be 1a and the second is 1b. Short narrations are expected for each journal entry.
· The consolidated statements required for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Notes to the statements are not required.
· 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.
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