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Pepsi Ltd acquired 80% of the shares of Soda Ltd on 1 July 2015 for $115 000. At this date the equity of Soda Ltd consisted of:

$

Share capital (100,000 shares)

80,000

Retained earnings

29,600

General reserve

2,400

All the identifiable assets and liabilities of Soda Ltd were recorded at amounts equal to their fair values except for:

Carrying amount

Fair value

$

$

Inventories

25,000

28,000

Plant (cost $65,000)

52,000

56,000

Land

40,000

45,000


The plant was expected to have a further useful life of 10 years. The land was sold on 1 January 2018. The inventory was all sold by 30 June 2016. Pepsi Ltd uses the full goodwill method. The fair value of the non-controlling interest at 1 July 2015 was $28,000. At 1 July 2015, Soda Ltd had unrecorded (internally generated) customer lists that had a fair value of $18,000. These customer lists had an indefinite life.

Financial information provided by the two companies at 30 June 2018 was:

Pepsi Ltd

Soda Ltd

$

$

Sales

252,800

176,000

Debenture interest

4,000

-

Management and consultation fees

4,000

-


Pepsi Ltd

Soda Ltd

$

$

Dividends

9,600

-

Total revenue

270,400

176,000

Cost of sales

104,000

68,000

Manufacturing expenses

82,000

53,000

Depreciation on plant

12,000

12,000

Administrative expenses

12,000

6,400

Financial expenses

8,800

4,000

Other expenses

11,200

9,600

Total expenses

230,000

153,000

Profit from trading

40,400

23,000

Gains on sale of non-current assets

10,000

5,000

Profit before income tax

50,400

28,000

Income tax expense

20,000

13,600

Profit for the year

30,400

14,400

Retained earnings 1 July 2017

40,000

36,000

70,400

50,400

Dividend paid

Dividend declared

8,000

4,000

16,000

12,000

Retained earnings 30 June 2018

54,400

38,400

Share capital

240,000

80,000

General reserve

37,600

8,000

Other components of equity

10,400

8,000

Debentures

160,000

80,000

Current tax liability

20,000

13,600

Dividend payable

8,000

4,000


Pepsi Ltd

Soda Ltd

$

$

Deferred tax liabilities

12,000

5,600

Other current liabilities

60,000

9,600

Total equity and liabilities

602,400

247,200

Shares in Soda Ltd

115,000

-

Debentures in Soda Ltd

80,000

-

Plant

96,000

81,600

Accumulated depreciation - plant

(52,000)

(44,000)

Intangibles

60,800

44,000

Accumulated amortisation - intangibles

(32,000)

(20,000)

Deferred tax assets

58,600

24,000

Financial assets

40,000

48,000

Land

120,000

45,600

Inventories

72,000

44,000

Receivables

44,000

24,000

Total assets

602,400

247,200

  1. Soda Ltd had inventory on hand at 30 June 2017 that included inventory at cost of $8,000 that had been sold to Soda Ltd by Pepsi Ltd. This inventory had cost Pepsi Ltd $6,000. It was all sold by Soda Ltd by 30 June 2018.

  2. During the 2017–18 year, Soda Ltd sold inventory to Pepsi Ltd for $48,000. At 30 June 2018, Pepsi Ltd still had some of this inventory on hand. This inventory had been sold to Pepsi Ltd by Soda Ltd at a profit of $4,000.

  3. On 1 January 2017, Soda Ltd sold plant to Pepsi Ltd for $16,000. This had a carrying amount in Soda Ltd at time of sale of $12,000. Plant of this class is depreciated at 20% p.a.

  4. Management and consultation fees derived by Pepsi Ltd are all from Soda Ltd and represent charges for administration of $1,760 and charges for technical services for the manufacturing section of $2,240.

  5. All debentures issued by Soda Ltd are held by Pepsi Ltd and interests are accounted for appropriately by both companies.

  6. Other components of equity relate to movements in the fair values of financial assets held by the entities. Gains and losses on these financial assets are recognised in other comprehensive income. The balance of the other components of equity account at 1 July
  1. Prepare an acquisition analysis.
  1. Prepare the consolidation worksheet entries for the year ended 30 June 2018.

Ingram Ltd acquired 35% of ordinary shares issued in A Ltd for $300,000 on 1 July 2017. The equity of A Ltd at that date was as follows.

$

Ordinary

560,000

share

capital

Retained

54,000

earnings


All assets were recorded at fair value at acquisition date, except for plant and equipment which had a fair value of $20,000 above its carrying amount. This plant and equipment was estimated to have a remaining useful life of 5 years.

On 1 July 2017, land was recorded in the books of A Ltd at $100,000. The fair value of this asset has since risen by $40,000, with $28,000 ($40,000 less 30% tax) being credited to a revaluation surplus account by A Ltd on 30 June 2018.

On 1 January 2018, A Ltd sold a motor vehicle to Ingram Ltd for $34,000. The vehicle had originally cost A Ltd $68,000, and had a carrying amount of $20,000 at 1 January 2018. The motor vehicle had a remaining useful life of 4 years.

At 30 June 2018, Ingram Ltd had inventory costing $40,000 on hand which had been purchased from A Ltd during the financial year. A profit before tax of $10,000 had been made on the sale.

As at 30 June 2018, the following relates to A Ltd:


$

Operating profit before income tax

180,000

Income tax expense

54,000

Dividends paid

30,000

The tax rate is 30%.

  1. Prepare an acquisition analysis in relation to the acquisition made by Ingram Ltd.
  1. Assume Ingram Ltd does prepare consolidated financial statements. Prepare the consolidated worksheet entries for the year ended 30 June 2018 for inclusion of the equity-accounted results of A Ltd.

Behappy Ltd is an Australian company with a reporting period ends on 30 June. The company has entered into two independent transactions denominated in foreign currency as follows.

  1. Behappy Ltd sells some goods on credit on 13 June 2018 to a Singaporean company, Mother Kwan. The contract, denominated in Singapore dollars, amounts to $125,000. Mother Kwan settles the contract on 10 July 2018.

The relevant exchange rates are as follows:

13 June 2018 A$1.00 = S$1.2536

30 June 2018 A$1.00 = S$1.2875

10 July 2018 A$1.00 = S$1.3103

  1. On 15 June 2018, Behappy Ltd acquires plant and equipment on credit from Senang Bhd, a Malaysian company. The contract is denominated in Malaysian Ringgit and the acquisition amounts to MYR300,000. Behappy Ltd settles the contract on 20 July 2018.

The relevant exchange rates are as follows:

15 June 2018 A$1.00 = MYR2.8079

30 June 2018 A$1.00 = MYR2.9946

20 July 2018 A$1.00 = MYR2.7152

In accordance with AASB 121, prepare all relevant journal entries of Behappy Ltd to account for the above transactions.

1. Acquisition analysis

Amount (in $)

Share Capital

           80,000.00

Retained Earnings

           29,600.00

General Reserve

             2,400.00

Excess of fair value over carrying value:

Inventories

             2,100.00

Plant

             2,800.00

Land

             3,500.00

Unrecorded Customer List

           12,600.00

Fair value of identifiable assets & liabilities acquired

        133,000.00

% of shares acquired

80%

Consideration paid

        115,000.00

Non-controlling interest

           28,000.00

Aggregate

        143,000.00

Goodwill

           10,000.00

Goodwill of Soda Ltd.

Fair value

        140,000.00

Fair value of identifiable assets & liabilities acquired of Soda Ltd.

        133,000.00

Goodwill of Soda Ltd

             7,000.00

Goodwill of Pepsi Ltd

Goodwill acquired

           10,000.00

Goodwill of Soda Ltd

             7,000.00

Goodwill of Pepsi Ltd - Control premium

             3,000.00

2. Consolidation Worksheet Entries for the year ended 30 June, 2018

1. Business Combination Valuation Entries

Accumulated Depreciation

 Dr.

      13,000.00

Plant

 Cr.

        9,000.00

Deferred tax liability

 Cr.

        1,200.00

BCVR

 Cr.

        2,800.00

(Fair valuation of Plant)

Depreciation expense (4000/10*1)

 Dr.

            400.00

Retained earnings (1/7/17) (4000/10*2)

 Dr.

            800.00

Accumulated depreciation

 Cr.

        1,200.00

(Recording depreciation)

Deferred tax liability

 Dr.

            360.00

Income tax expense

 Cr.

            120.00

Retained earnings (1/7/17)

 Cr.

            240.00

(Recording income tax on depreciation)

Gain on sale of land

 Dr.

        5,000.00

Income Tax expense

 Cr.

        1,500.00

Transfer from BCVR

 Cr.

        3,500.00

(Recording sale of land in the current year)

Unrecorded Customer List

 Dr.

      18,000.00

Deferred tax liability

 Cr.

        5,400.00

BCVR

 Cr.

      12,600.00

(Record customer list at fair value)

Goodwill

 Dr.

        7,000.00

BCVR

 Cr.

        7,000.00

(Recording goodwill on acquisition)

2. Pre-Acquisition entry as on 31/7/18

Share Capital

 Dr.

      64,000.00

Retained Earnings (1/7/17)

 Dr.

      25,360.00

General Reserve

 Dr.

        1,920.00

Goodwill

 Dr.

        3,000.00

BCVR

 Dr.

      20,720.00

Investment in Soda Ltd.

 Cr.

    115,000.00

(Recording acquisition of subsidiary)

Transfer from BCVR

 Dr.

        2,800.00

BCVR

 Cr.

        2,800.00

(Recording transfer of amount -sale of land)

3. NCI share of equity at acquisition date (1/7/15)

Share Capital

 Dr.

      16,000.00

Retained Earnings (1/7/17)

 Dr.

        5,920.00

General Reserve

 Dr.

            480.00

BCVR

 Dr.

        5,600.00

NCI

 Cr.

      28,000.00

(Recording share of NCI)

Retained Earnings (1/7/17)

 Dr.

        1,588.00

General Reserve

 Dr.

        1,120.00

Other components of equity

 Dr.

        1,280.00

BCVR

 Cr.

            420.00

NCI

 Cr.

        3,568.00

(Recording NCI share in profits for 1/7/15 30/06/17)

NCI share of profit

 Dr.

        2,824.00

NCI

 Cr.

        2,824.00

(Recording NCI share in profit for 1/7/17 30/06/18)

Transfer from BCVR

 Dr.

            700.00

BCVR

 Cr.

            700.00

(Recording NCI share on sale of land)

Gains/Losses: other components of equity

 Dr.

            320.00

NCI

 Cr.

            320.00

(Recording NCI share of profit for current year)

NCI

 Dr.

        1,600.00

Interim Dividend Paid

 Cr.

        1,600.00

(Recording payment of interim dividend)

NCI

 Dr.

            800.00

Final Dividend declared

 Cr.

            800.00

(Recording payment of final dividend)

4. Other journal entries

Retained Earnings (1/7/17)

 Dr.

        1,400.00

Income tax expenses

 Dr.

            600.00

Cost of Sales

 Cr.

        2,000.00

(Recording elimination of profit from opening inventory)

Sales

 Dr.

      48,000.00

Cost of Sales

 Cr.

      44,000.00

Inventory

 Cr.

        4,000.00

(Recording elimination of profit from closing  inventory)

Deferred tax asset

 Dr.

        1,200.00

Income tax expense

 Cr.

        1,200.00

(Recording tax impact on above elimination)

NCI

 Dr.

            560.00

NCI share of profit

 Cr.

            560.00

(Recording reduction in NCI due above adjustment)

Retained Earnings (1/7/17)

 Dr.

        2,800.00

Deferred tax asset

 Dr.

        1,200.00

Plant

 Cr.

        4,000.00

(Recording elimination of profit from inter-company sale of plant)

NCI

 Dr.

            560.00

NCI share of profit

 Cr.

            560.00

(Recording reduction in NCI due above adjustment)

Accumulated Depreciation

 Dr.

        1,200.00

Retained Earnings (1/7/17)

 Cr.

            400.00

Depreciation expenses

 Cr.

            800.00

(Recording reversal of depreciation on above elimination)

Income tax expense

 Dr.

            240.00

Retained Earnings (1/7/17)

 Dr.

            120.00

Deferred tax liability

 Cr.

            360.00

(Recording income tax)

NCI share of profit

 Dr.

              56.00

Retained Earnings (1/7/17)

 Dr.

            112.00

NCI

 Cr.

            168.00

(Recording reduction in NCI due to above adjustment)

Management and consultation fees

 Dr.

        4,000.00

Administration expenses

 Cr.

        1,760.00

Manufacturing expenses

 Cr.

        2,240.00

(Recording elimination of inter-company transaction)

Debentures

 Dr.

      80,000.00

Debentures in Soda Ltd.

 Cr.

      80,000.00

(Recording elimination of inter-company transaction of debentures)

Debenture Interest

 Dr.

        4,000.00

Financial expenses

 Cr.

        4,000.00

(Recording elimination of inter-company transaction of debenture interest)

Dividend revenue

 Dr.

        6,400.00

Dividend paid

 Cr.

        6,400.00

(Recording elimination of inter-company dividend)

Dividend Payable

 Dr.

        3,200.00

Dividend declared

 Cr.

        3,200.00

(Recording elimination of inter-company dividend payable)

Dividend revenue

 Dr.

        3,200.00

Dividend receivable

 Cr.

        3,200.00

(Recording elimination of inter-company dividend receivable)

1. Acquisition analysis

Amount (in $)

Share Capital

  560,000.00

Retained Earnings

    54,000.00

Excess of fair value over carrying value:

Plant & Equipment

    14,000.00

Fair value of net assets acquired

  628,000.00

% of shares acquired

35%

Fair value of net assets

  219,800.00

Consideration paid

  300,000.00

Goodwill

    80,200.00

2. Consolidation Worksheet Entries for the year ended 30 June, 2018

Assuming Ingram Ltd does prepare consolidated financial statements

Investment in A Ltd.

 Dr.

9,800.00

Asset revaluation surplus

 Cr.

9,800.00

(Recording gain on revaluation of land)

Investment in A Ltd.  (WN-1)

 Dr.

37,668.75

Share of profit or loss of associates and joint ventures

 Cr.

37,668.75

(Recording share in profit of current year)

Dividend Revenue

 Dr.

10,500.00

Investment in A Ltd.

 Cr.

10,500.00

(Recording receipt of dividend paid by A Ltd.)

 

WN-1: Working for share in profit

Net Profit

107,625.00

Investor's share

35%

Investor's share in profit

37,668.75

Profit for the year

  126,000.00

Depreciation on fair value of plant & equipment

     (2,800.00)

Unreliased profit in sale of vehicle

     (9,800.00)

Reversal of excess depreciation charged on above profit

       1,225.00

Unreliased profit in closing inventory

     (7,000.00)

107,625.00

Behappy Ltd.

Journal entries for the year ending 30 June 2018

Date

Account description

Dr./Cr.

Amount ($)

13-Jun-18

Accounts receivable

Dr.

99,713

Sales

Cr.

99,713

(Recording sale of product)

30-Jun-18

Unrealized foreign exchange loss

Dr.

2,626

Accounts receivable

Cr.

2,626

(Recording loss on restatement at year end)

10-Jul-18

Cash

Dr.

95,398

Foreign exchange loss

Dr.

1,689

Accounts receivable

Cr.

97,087

(Recording receipt of money)

10-Jul-18

Foreign exchange loss

Dr.

2,626

Unrealised foreign exchange loss

Cr.

2,626

(Recording transfer of amount)

 

Behappy Ltd.

Journal entries for the year ending 30 June 2018

Date

Account description

Dr./Cr.

Amount ($)

15-Jun-18

Plant & Equipment

Dr.

     106,841

Accounts Payable

Cr.

     106,841

(Recording purchase of asset on credit)

30-Jun-18

Accounts Payable

Dr.

          6,661

Unrealised foreign exchange gain

Cr.

          6,661

(Recording gain on restatement at year end)

20-Jul-18

Accounts Payable

Dr.

     100,181

Foreign exchange loss

Dr.

        10,308

Cash

Cr.

     110,489

(Recording payment of cash vendor)

20-Jul-18

Unrealised foreign exchange gain

Dr.

          6,661

Foreign exchange loss

Cr.

          6,661

(Recording transfer of amount)

 
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My Assignment Help. (2021). Consolidation: Non-controlling Interests; Essay On Associates; And Foreign Currency Transactions.. Retrieved from https://myassignmenthelp.com/free-samples/acc567-financial-accounting/consolidation-non-controlling-interests.html.

"Consolidation: Non-controlling Interests; Essay On Associates; And Foreign Currency Transactions.." My Assignment Help, 2021, https://myassignmenthelp.com/free-samples/acc567-financial-accounting/consolidation-non-controlling-interests.html.

My Assignment Help (2021) Consolidation: Non-controlling Interests; Essay On Associates; And Foreign Currency Transactions. [Online]. Available from: https://myassignmenthelp.com/free-samples/acc567-financial-accounting/consolidation-non-controlling-interests.html
[Accessed 24 July 2024].

My Assignment Help. 'Consolidation: Non-controlling Interests; Essay On Associates; And Foreign Currency Transactions.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/acc567-financial-accounting/consolidation-non-controlling-interests.html> accessed 24 July 2024.

My Assignment Help. Consolidation: Non-controlling Interests; Essay On Associates; And Foreign Currency Transactions. [Internet]. My Assignment Help. 2021 [cited 24 July 2024]. Available from: https://myassignmenthelp.com/free-samples/acc567-financial-accounting/consolidation-non-controlling-interests.html.

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