ACCT2201 GROUP CASE STUDY
On 1 July 2013 Jane Ltd acquired all of the share capital (cum div) of Tarzan Limited for aconsideration of $500,000 cash and a brand that was held in their accounts at a book value of $10,000 but now had a fair value of $34,000. At the date of acquisition Tarzan's accounts showed a dividend payable of $10,000.
At that date all the identifiable assets and liabilities were recorded at fair value with the exception of:
|
ASSET
Inventory
Land
Plant
(less depn)
Acounts Receivable
|
Book Value Market Value
|
10,000
25,000
20,000
-3,000
17,000
16,000
|
14,000
30,000
22,000
14,000
|
|
The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $14,000
The land was sold on 30/12/16 for $32000. The plant was on hand still at 30/6/17.
At the date of acquisition the equity of Tarzan Ltd consisted of:
|
Share Capital 380,000
General Reserve 70,000
Retained Earnings 62,000
|
Information from the trial balances of Tarzan Ltd and Jane Ltd at 30 June 2017 is presented overleaf.
Additional Information
1. On 1 Jan 2017 Tarzan Ltd sold inventory to Jane Ltd costing $60,000 for $80,000. Half of this inventory was sold to outside parties for $30,000 by 30/6/17.
2. On 1 Jan 2016 Jane Ltd sold inventory costing $9000 to Tarzan Ltd for $12,000. Tarzan Ltd treats the item as equipment and depreciates it at 10% per annum.
3.On 1 July 2016 Tarzan sold plant to Jane for $12,000. The plant had cost Tarzan $10,000 on
1 July 2014 and it was being depreciated at 10% per annum. Jane regards the plant as inventory. The inventory was all sold by 30th July 2016.
4. At 1 July 2016 Jane Ltd held inventory that it had purchased from Tarzan Ltd on 1 June
2016 at a profit of $7000. All inventory was sold by 30 June 2017
5. Jane Ltd accrues dividends from Tarzan Ltd once they are declared.
6. Jane Ltd has earned $1200 in interest revenue in the 2017 financial year from Tarzan Ltd. 7. Jane Ltd has earned $4800 in service revenue in the 2017 financial year from Tarzan Ltd. 8. Assume a tax rate of 30%.
Required:
A. Prepare the acquisition analysis at 1 July 2013.
B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013.
C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017.
D. Prepare the consolidation worksheet journal entries to eliminate the effects of inter-entity transactions as at 30 June 2017.
E. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2017.
F. Prepare the consolidated statement of profit or loss and other comprehensive income, the consolidated balance sheet and the consolidated statement of changes inequity for the period ended 30 June 2017.
Presentation
Your work should be prepared using an Excel spreadsheet and saved as a PDF to be submitted via LMS by the due date.
Trial Balances
As at 30 June 2017
|
|
Jane Ltd
|
Tarzan Ltd
|
|
|
DR
|
CR
|
DR
|
CR
|
|
Sales Revenue
|
|
1,192,500
|
|
932,500
|
|
Cost of Sales
|
888,000
|
|
676,000
|
|
|
Wages and Salaries
|
61,000
|
|
32,000
|
|
|
Depreciation Expense
|
5,200
|
|
4,800
|
|
|
Service Expense
|
3,500
|
|
4,800
|
|
|
Interest Expense
|
7,000
|
|
1,200
|
|
|
Other Expenses
|
4,000
|
|
9,000
|
|
|
Gain on Sale of Non Current Assets
|
-
|
|
|
10,000
|
|
Service Revenue
|
|
4,800
|
|
5,000
|
|
Interest Revenue
|
|
1,200
|
|
7,000
|
|
Dividend Revenue
|
|
16,000
|
|
-
|
|
Income tax expense
|
97,120
|
|
118,480
|
|
|
Retained Earnings 1/7/16
|
|
100,820
|
|
70,280
|
|
Dividend Paid
|
10,000
|
|
7,000
|
|
|
Dividend Declared
|
12,000
|
|
9,000
|
|
|
Share Capital
|
|
500,000
|
|
380,000
|
|
General Reserve
|
|
146,000
|
|
70,000
|
|
Other Equity 1/7/16
|
|
4,000
|
|
12,000
|
|
Gains on Financial Assets (OCI)
|
|
1,000
|
|
6,000
|
|
Loan Payable to Jane Ltd
|
|
-
|
|
16,000
|
|
Deferred Tax Liability
|
|
52,000
|
|
30,000
|
|
Dividend Payable
|
|
12,000
|
|
9,000
|
|
Shares in Tarzan Ltd
|
524,000
|
|
-
|
|
|
Cash
|
86,000
|
|
147,500
|
|
|
Inventories
|
169,500
|
|
36,000
|
|
|
Other Current Assets
|
11,000
|
|
300,000
|
|
|
Dividend Receivable
|
9,000
|
|
-
|
|
|
Loan receivable from Tarzan Ltd
|
16,000
|
|
-
|
|
|
Financial Assets
|
15,000
|
|
68,000
|
|
|
Plant and Equipment
|
52,000
|
|
28,000
|
|
|
Acc. Depreciation Plant
|
|
10,000
|
|
14,000
|
|
Land
|
70,000
|
|
120,000
|
|
|
|
2,040,320
|
2,040,320
|
1,561,780
|
1,561,780
|