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Questions:

Topic 1 has two following parts:
• Part A is the preparation of all consolidation elimination journals necessary before preparation of consolidated set of financial statements for year ending 30 June 2019, for an economic entity comprising a parent and subsidiary. Also prepare a calculation of non-controlling interest at acquisition date, between acquisition date and the beginning of the reporting period and for current reporting period. (30 marks)

2,500 words maximum (comprising calculations and working papers in Part A equivalent to 2000 words and a written component of 500 words in Part B). All consolidation workings, journals and explanations need to be performed on Excel spreadsheet.Students should develop, name and use at least one macro for Excel spreadsheet calculation purpose.Points will be awarded for: correct format of journals, correct journal entries including narrations, correct and clearly referenced workings and explanations.

FMCG Ltd (who is in retail business) has to prepare its consolidated financial statements at 30 June 2019. FMCG Ltd had acquired its 85% interest in RG Ltd on 1 July 2017, that is, two years earlier. At that date the capital and reserves of RG Ltd were:
Share capital $200,000
Retained earnings $170,000
At the date of acquisition all asset of RG Ltd considered to be fair valued.
The financial statements of FMCG Ltd and its subsidiary RG Ltd at 30 June 2019 are as follows:
Statement of financial position
Description FMCG Ltd ($000) RG Ltd ($000)
Current assets
Accounts receivable 60 62
Inventory 90 30
Non-current assets
Land and buildings 225 325
Plant-at cost 300 356
Accumulated depreciation (86) (140)
Investment in RG Ltd 360 -
Total 949 633
Current liabilities
Accounts payable 56 45
Taxation payable 42 24
Non-current liabilities
Loans payable 175 118
Shareholders’ equity
Share capital 350 200
Retained earnings 326 246
Total 949 633

Detailed reconciliation of opening and closing retained earnings
Description FMCG Ltd ($000) RG Ltd ($000)
Sales revenue 700 575
Cost of goods sols (465) (235)
Gross profit 235 340
Expenses
Administration expenses (30) (40)
Management fee expenses - (26)
Depreciation (25) (55)
Other expenses (102) (76)
Other income

Management fee income 26 -
Dividends from RG Ltd 75 -
Gain on sale of plant 35 -
Profit before tax 214 143
Tax expense (65) (43)
Profit for the year 149 100
Retained earnings- 30 June
2018
315 240
464 340
Dividends paid (138) (94)
Retained earnings- 30 June
2019
326 246

Following are the list of transactions between FMCG Ltd and its subsidiary RG Ltd during the year 1 July 2018 to 30 June 2019:
• RG Ltd paid $26,000 in management fee to FMCG Ltd.
• FMCG management determined that the goodwill is impaired by $5,000 in the current financial year. Previous accumulated impairment amounted to $22,000.
• During the year FMCG Ltd made total sales to RG Ltd of $60,000, while RG Ltd sold $50,000 in inventory to FMCG Ltd.
• The opening inventory in FMCG Ltd as at 1 July 2018 included inventory acquired from RG Ltd for $40,000 that had cost RG Ltd $33,000 to produce.
• The closing inventory in FMCG Ltd includes inventory purchased from RG Ltd at a cost of 33,000. The cost of this inventory to RG Ltd was $27,000.
• The closing inventory of RG Ltd includes inventory acquired from FMCG Ltd at a cost of $12,000. This cost FMCG Ltd $9,000 to produce.
• On 1 July 2018, FMCG Ltd sold an item of equipment to RG Ltd for $120,000 when its carrying value in FMCG Ltd was $80,000 (cost of $132,000, accumulated depreciation of $52,000). Remaining useful life for this equipment is being assessed as six years.
• Management of FMCG Ltd values any non-controlling interest at the proportionate share of RG Ltd’s identifiable net assets.
• Applicable tax rate is 30%.
• All calculated amounts are to be rounded to the nearest whole dollar.

Required: Prepare the consolidation eliminations journals necessary and required before preparation of consolidated financial statements of FMCG Ltd and its subsidiary (state narrations to journals, provide clear workings and explanations). Also prepare a calculation of non-controlling interest at acquisition date, between acquisition date and the beginning of the reporting period and for current reporting period. (30 marks)

The consolidated financial statements of FMCG Ltd and RG Ltd were presented to the Board. The Board is alarmed that the economic entity’s balance sheet (consolidated balance sheet) shows a deferred tax balance, when the accounts for FMCG Ltd had no deferred tax asset or deferred tax liability.FMCG management is also planning to acquire another entity ABC Investments Ltd in the near future. Management pointed out to the Board that on acquisition, the financial results of this new subsidiary (ABC Investments Ltd) will also be consolidated in the economic entity financial statements.

One of the Board members noted that the new business to be acquired by FMCG Ltd is an investment company. Its financial statements should not be consolidated because it is involved in investments industry, whereas all of the other companies in the economic entity are involved in retail industry.
Required:
As the financial accountant you are requested to prepare a response to the following questions:
(a) Why does the economic entity have a deferred tax balance? (2.5 marks)
(b) Should the financial statements of proposed acquired business, ABC Investments Ltd, be consolidated into the economic entity and why? (2.5 marks)

ACT503 Corporate Accounting

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HA2011 Management Accounting

Questions: Assignment Task: 1. Reflections on any one topic covered in the unit that interests you the most from this unit. Why was it interesting and what had you learnt from it?   2. Reflections on your experience as a group member in the group assignment. What went well, what did not g ...

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