Advance Accounting Preparation of Consolidated Journal Entries Homework Help
- August 11, 2017
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- Category: Accounting QA
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1.On 30th June 2011 Peach Ltd acquired 100 per cent of the shares in Pear Ltd for $730,000
The following shows the financial positions of the companies as at 30 June 2011 (immediately following the acquisition).
Peach Ltd | Pear Ltd | |
Equity | $ | $ |
Share capital | 1,314,000 | 292,000 |
Retained earnings | 438,000 | 219,000 |
1,752 000 | 511 000 | |
Liabilities | ||
Accounts payable | 160,600 | 102,200 |
Long-term loans | 292,000 | 277,400 |
Total liabilities | $452,600 | 379,600 |
Total equity and liabilities | $2,204,600 | $890,600 |
Assets | ||
Cash | 146,000 | 73,000 |
Accounts receivable | 189,800 | 131,400 |
Inventory | 292,000 | 160,600 |
Investment in Pear Ltd | 730,000 | |
Land | 438,000 | 146,000 |
Property, Plant and Equipment (PPE) | 584,000 | 511,000 |
Accumulated depreciation on PPE | (175,200) | (131,400) |
Total assets | $2,204,600 | $890,600 |
Additional Information
• All of the assets and liabilities of Pear Limited were valued at fair value at acquisition with the exception of the land, which had a fair value of $204,500.
• The tax rate is 30 per cent.
Required:
Prepare the consolidation journal entries and consolidation worksheet for the above entities.
2.The following financial statements of William Ltd and its subsidiary Adam Ltd have been extracted from their financial records at 30 June 2012.
William Ltd | Adam Ltd | |||
$ | $ | $ | $ | |
Extract from Statements of Comprehensive Income and Changes in Equity | ||||
Sales Revenue | 1,114,524 | 896,400 | ||
Cost of Sales | (770,240) | (395,080) | ||
Gross Profit | 344,284 | 501,320 | ||
Other Revenue | ||||
Dividends received from Adam | 154,380 | – | ||
Management fee revenue | 43,990 | – | ||
Gain on sale of equipment | 66,400 | 58,100 | ||
Expenses | ||||
General expenses | (51,128) | (64,242) | ||
Selling expenses | (167,826) | (119,520) | ||
Depreciation | (48,970) | (94,288) | ||
Management fee expense | – | (43,990) | ||
Total expenses | (267,924) | (322,040) | ||
Profit before tax | 341,130 | 237,380 | ||
Income tax expense | (102,090) | (70,052) | ||
Profit for the period | 239,040 | 167,328 | ||
Retained earnings 30 June 2011 | 530,204 | 397,072 | ||
769,244 | 564,400 | |||
Dividends paid | (228,084) | (154,380) | ||
Retained earnings 30 June 2012 | 541,160 | 410,020 | ||
Statements of Financial Position | ||||
Current assets | ||||
Cash | 20,000 | 30,000 | ||
Accounts receivable | 78,604 | 73,418 | ||
Inventory | 152,720 | 48,140 | ||
Non-current assets | ||||
Investment in Adam Ltd | 590,960 | – | ||
Land | 371,840 | 541,160 | ||
Equipment (cost) | 497,751 | 590,628 | ||
Accumulated depreciation | (142,345) | 355,406 | (230,408) | 360,220 |
Total Assets | 1,569,530 | 1,052,938 | ||
Current liabilities | ||||
Accounts payable | 90,802 | 76,858 | ||
Short-term loan payable | 68,558 | 41,500 | ||
Non-current liabilities | ||||
Long-term debt | 288,010 | 192,560 | ||
Shareholders’ equity | ||||
Share capital | 581,000 | 332,000 | ||
Retained earnings | 541,160 | 410,020 | ||
Total Liabilities & Equity | 1,569,530 | 1,052,938 |
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Other information
• William Ltd acquired the 100 per cent interest in Adam Ltd on 1 July 2007, that is five (5) years earlier. At that time the capital and retained earnings of Adam Ltd were:
Share capital $332,000
Retained earnings $298,800
$380,800
At the date of acquisition all assets were valued at their fair value.
• During the year William Ltd made total sales to Adam Ltd of $99,600, and Adam Ltd sold $83,000 of inventory to William Ltd.
• The opening inventory in William Ltd as at 1 July 2011 included inventory acquired from Adam Ltd for $66,400 that had cost Adam Ltd $49,800.
• The closing inventory of William Ltd includes inventory acquired from Adam Ltd at a cost of $54,780. This inventory had cost Adam $46,480.
• The closing inventory of Adam Ltd includes inventory acquired from William Ltd at a cost of $19,920. This inventory had cost William Ltd $16,600.
• On 1 July 2011 Adam Ltd sold an item of equipment to William Ltd for $192,560 when its carrying value in Adam Ltd’s books was $134,460 (cost $224,100, accumulated depreciation $89,640). This equipment is assessed as having a remaining useful life of six (6) years.
• Adam Ltd paid $43,990 in management fees to William Ltd.
• The tax rate is 30 per cent.
Required
1.Prepare the journal entries necessary for the preparation of consolidated financial statements.
2.Prepare a consolidated statement of financial position as at 30 June 2012 and a consolidated statement of comprehensive income and a consolidated statement of changes in equity for the period ended 30 June 2012 for William Ltd and its subsidiaries.
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