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The plant was considered to have a further 5-year life. The patents were sold for $120 000 to

an external entity on 18 August 2015. The inventory was all sold by 30 June 2016.

Additional information

(a)   Tuna Ltd sells certain raw materials to Brim Ltd to be used in its manufacturing process.

       At 1 July 2016, Brim Ltd held inventory sold to it by Tuna Ltd in the previous year at a profit of $600. During the 2016–17-year, Tuna Ltd sold inventory to Brim Ltd for $21 000. None of this was on hand at 30 June 2017.

(b)   Brim Ltd also sells items of inventory to Tuna Ltd. During the 2016–17 year, Brim Ltd sold goods to Tuna Ltd for $4500. At 30 June 2017, inventory which had been sold to Tuna Ltd at a profit of $300 was still on hand in Tuna Ltd.’s inventory.

(c)   On 1 July 2016, Brim Ltd sold an item of plant to Tuna Ltd for $15 000. This plant had a

       carrying amount in the records of Brim Ltd of $14 000 at time of sale. This type of plant is

       depreciated at 10% p.a. on cost.

(d)   On 1 January 2015, Tuna Ltd sold an item of inventory to Brim Ltd for $18 000. The

       inventory had cost Tuna Ltd $16 000. This item was classified by Brim Ltd as plant. Plant of this type is depreciated by Brim Ltd at 20% p.a.

(e)   On 1 March 2017, Brim Ltd sold an item of plant to Tuna Ltd. Whereas Brim Ltd classified this as plant, Tuna Ltd classified it as inventory. The sales price was $9000 which included a profit to Brim Ltd of $1500. Tuna Ltd sold this to another entity on 31 March for $9900.

(f)    The tax rate is 30%.

At 30 June 2017, the following financial information was provided by the two companies: 

Tuna Ltd

Brim Ltd

Dr

Cr

Dr

Cr

Sales revenue

64 500

78 000

Cost of sales

30 900

46 350

Trading expenses

4 800

9 000

Office expenses

7 950

4 050

Depreciation expenses

1 800

3 900

Proceeds on sale of plant

9 000

15 000

Carrying amount of plant sold

7 500

14 000

Income tax expense

11 100

7 300

Share capital

96 000

66 000

Retained earnings (1/7/16)

48 000

31 500

Current liabilities

21 100

10 500

Deferred tax liability

11 000

15 000

Plant

57 000

107 250

Accumulated depreciation – plant

18 300

33 450

Intangibles

12 000

11 100

Deferred tax assets

8 100

9 450

Shares in Brim Ltd

90 000

0

Inventory

28 500

24 600

Receivables

8 250

12 450

267 900

267 900

249 450

249 450

 Required

  1. Calculate acquisition analysis for Tuna Ltd (10 marks)
  2. Prepare consolidation journal entries for Tuna Ltd (10 marks)
  3. Prepare a consolidated set of financial statements for the group. Use the worksheet provided. (10 marks)

Worksheet for requirement 3. 

Tuna

Ltd

Brim

Ltd

Journal number

Adjustments

Journal  

Group

Dr

Cr

number

Sales revenue

64 500

78 000

Cost of sales

30 900

46 350

Gross profit

33 600

31 650

Trading expenses

4 800

9 000

Office expenses

7 950

4 050

Depreciation

1 800

3 900

14 550

16 950

Profit from trading

19 050

14 700

Proceeds from sale of plant

9 000

15 000

Carrying amount of plant sold

7 500

14 000

Gain/loss on sale of machinery

1 500

1 000

Profit before tax

20 550

15 700

Tax expense

11 100

7 300

Profit

9 450

8 400

Retained earnings (1/7/16)

48 000

31 500

Retained earnings (30/6/17)

57 450

39 900

Share capital

96 000

66 000

BCVR

--

--

Total equity

153 450

105 900

Current liabilities

21 100

10 500

Deferred tax liability

11 000

15 000

 Total liabilities

32 100

25 500

Total equity and liabilities

185 550

131 400


Dr

Cr

Plant

57 000

107 250

Accumulated depreciation

(18 300)

(33 450)

Intangibles

12 000

11 100

Shares in Brim Ltd

90 000

-

Deferred tax asset

8 100

9 450

Inventory

28 500

24 600

Receivables

8 250

12 450

Goodwill

0

0

Total assets

185 550

131 400

Acquisition analysis for Tuna Ltd.              
As on 1 July, 2015              
               
Particulars Calculation basis  Amount   Amount         
Share Capital      $ 66,000        
Retained Earnings      $   6,000        
Fair value:              
 - Plant  ((123000-120000)*(1-30%))    $   2,100        
 - Patent  ((105000-90000)*(1-30%))    $ 10,500        
 - Inventory  ((22500-18000)*(1-30%))    $   3,150        
Net fair value of assets acquired - (a)      $ 87,750        
               
Consideration paid - (b)              
 - In cash    $ 30,000          
 - In shares    $ 60,000  $ 90,000        
               
Goodwill (b-a)      $   2,250        
               
               
  Consolidation Journal Entries for Tuna Ltd.            
  As on 30 June, 2017            
               
I Pre Acquisition entry as on 1/7/15        
               
               
  Particulars  Debit   Credit         
  Share Capital  $ 66,000          
  Retained Earnings  $   6,000          
  Goodwill  $   2,250          
  Businee Combination Valuation Reserve  $ 15,750          
  To Shares in Brim Ltd.    $ 90,000        
               
               
II Pre Acquisition entry as on 30/6/17        
               
               
JV Particulars  Debit   Credit         
I Share Capital  $ 66,000          
  Retained Earnings  $ 19,650          
  Goodwill  $   2,250          
  Businee Combination Valuation Reserve  $   2,100          
  To Shares in Brim Ltd.    $ 90,000        
               
               
III Business Combination Valuation Entries        
               
               
JV Particulars  Debit   Credit         
II Accumulated Depreciation  $ 30,000          
  To Plant    $ 27,000        
  To Deferred tax liability    $      900        
  To Business Combination Valuation Reserve    $   2,100        
  (To record fair value of the plant)            
               
III Depreciation (3000/5)  $      600          
  Retained earnings (1/7/16)  $      600          
  To Accumulated Depreciation    $   1,200        
  (To record depreciation on above fair valuation)            
               
  Deferred tax liablility   $      360          
  To Income tax expense    $      180        
  To Retained earnings (1/7/16)    $      180        
  (To record income tax impact on above)            
               
               
IV Other consolidation entries        
               
               
JV Particulars  Debit   Credit         
IV(a) Sales revenue  $ 21,000          
  To Cost of sales    $ 21,000        
  (To record elimination of inter company sale of inventory)            
               
  Retained earnings (1/7/16)  $      420          
  Income tax expense  $      180          
  To Cost of sales    $      600        
  (To record elimination of profit in opening inventory)            
               
IV(b) Sales revenue  $   4,500          
  To Cost of sales    $   4,200        
  To Inventory    $      300        
  (To record elimination of profit in closing inventory)            
               
  Deferred tax asset  $        90          
  To Income tax expense    $        90        
  (To record income tax impact on above)            
               
IV(c) Proceeds on sale of Plant  $ 15,000          
  To Carrying amount of plant sold    $ 14,000        
  To Plant    $   1,000        
  (To record elimination of profit in inter company sale of plant)            
               
  Deferred tax asset  $      300          
  To Income tax expense    $      300        
  (To record income tax impact on above)            
               
  Accumulated Depreciation (1000*10%)  $      100          
  To Depreciation     $      100        
  (To record reversal of excess depreciation charged)            
               
  Income tax expense  $        30          
  To Deferred tax asset    $        30        
  (To record income tax impact on above)            
               
IV(d) Retained earnings (1/7/16)  $   1,400          
  Deferred tax asset  $      600          
  To Plant (18000-16000)    $   2,000        
  (To record elimination of unrealised profit)            
               
  Accumulated depreciation  $   1,000          
  To Depreciation expense (2000*20%)    $      400        
  To Retained earnings (1/7/16) (2000*20%*1.5)    $      600        
  (To record reversal of excess depreciation charged)            
               
  Income tax expense  $      120          
  Retained earnings (1/7/16)  $      180          
  To Deferred tax asset    $      300        
  (To record deferred tax impact on above)            
               
IV(e) Proceeds on sale of Plant  $   9,000          
  To Carrying amount of plant sold    $   7,500        
  To Cost of sales    $   1,500        
  (To record elimination of unrealised profit)            
               
               
               
Consolidated set of financial statements              
               
               
   Tuna Ltd.   Brim Ltd.  Journal number  Adjustments  Journal number Group
 Dr   Cr 
Sales revenue       64,500     78,000 IV(a),IV(b)   25,500      1,17,000
Cost of sales       30,900     46,350       27,300 IV(a),IV(b),IV(e)     49,950
Gross profit       33,600     31,650             67,050
Trading expenses         4,800       9,000             13,800
Office expenses         7,950       4,050             12,000
Depreciation         1,800       3,900 III        600        500 IV(c),IV(d)       5,800
        14,550     16,950             31,600
Profit from trading       19,050     14,700             35,450
Proceeds from sale of plant         9,000     15,000 IV(c),IV(e)   24,000                 -  
Carrying amount of plant sold         7,500     14,000       21,500 IV(c),IV(e)             -  
Gain/loss on sale of machinery         1,500       1,000                     -  
Profit before tax       20,550     15,700             35,450
Tax expense       11,100       7,300 IV(a),IV(c),IV(d)        330        570 III,IV(b),IV(c)     18,160
Profit         9,450       8,400             17,290
Retained earnings (1/7/16)       48,000     31,500 I,III,IV(a),IV(d)   22,250        780 III,IV(d)     58,030
               
Retained earnings (30/6/17)       57,450     39,900             75,320
Share capital       96,000     66,000 I   66,000         96,000
BCVR               -               -   I     2,100     2,100 II             -  
Total equity    1,53,450  1,05,900          1,71,320
               
Current liabilities       21,100     10,500             31,600
Deferred tax liability       11,000     15,000 III        360        900 II     26,540
 Total liabilities       32,100     25,500             58,140
Total equity and liabilities    1,85,550  1,31,400          2,29,460
               
Plant       57,000  1,07,250       30,000 II,IV(c),IV(d)  1,34,250
Accumulated depreciation     (18,300)   (33,450) II,IV(c),IV(d)   31,100     1,200 III    (21,850)
Intangibles       12,000     11,100             23,100
Shares in Brim Ltd       90,000             -         90,000 I             -  
Deferred tax asset         8,100       9,450             17,550
Inventory       28,500     24,600            300 IV(b)     52,800
Receivables         8,250     12,450             20,700
Goodwill               -               -   I     2,250           2,250
Deferrec tax asset               -               -   IV(b),IV(c),IV(d)        990        330 IV(c),IV(d)          660
Total assets    1,85,550  1,31,400          2,29,460
               
Cite This Work

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My Assignment Help. (2020). Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd Were Documented In An Essay. (70 Characters). Retrieved from https://myassignmenthelp.com/free-samples/acc705-corporate-accounting/financial-information.html.

"Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd Were Documented In An Essay. (70 Characters)." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/acc705-corporate-accounting/financial-information.html.

My Assignment Help (2020) Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd Were Documented In An Essay. (70 Characters) [Online]. Available from: https://myassignmenthelp.com/free-samples/acc705-corporate-accounting/financial-information.html
[Accessed 21 May 2024].

My Assignment Help. 'Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd Were Documented In An Essay. (70 Characters)' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/acc705-corporate-accounting/financial-information.html> accessed 21 May 2024.

My Assignment Help. Inventory Sales And Plant Transactions Between Tuna Ltd And Brim Ltd Were Documented In An Essay. (70 Characters) [Internet]. My Assignment Help. 2020 [cited 21 May 2024]. Available from: https://myassignmenthelp.com/free-samples/acc705-corporate-accounting/financial-information.html.

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