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ACCTING2501 Financial Accounting

tag 0 Download 7 Pages / 1,709 Words tag 11-11-2020



1. Consolidation: Non-controlling interests

On 1 July 2016, Poppy Ltd acquired 80% of the issued shares of Sunshine Ltd for $240 000 when the equity of Sunshine Ltd consisted of:

At this date, all identifiable assets and liabilities of Sunshine Ltd were recorded at fair value except for the following.

Half of the inventories were sold by 30 June 2017 and the remainder by 30 June 2018. The plant has a further 3-year life beyond 1 July 2016, with benefits to be received evenly over this period. The land was sold on 1 March 2020 to an external party. Adjustments for the differences between carrying amounts and fair values are to be made in the consolidation worksheet. Poppy Ltd uses the partial goodwill method. The tax rate is 30%.

During the 4 years since acquisition, Sunshine Ltd has recorded the following annual results and declared the following dividends.

Year ended

Profit (loss)





30 June 2017



30 June 2018



Dividends were paid within 6 weeks of the end of each period. There have been no transfers to or from the general reserve since the acquisition date.

2. Investment in associates

On 1 July 2016, Pandini Ltd acquired 25% of the shares of Amani Ltd for $400,000. The acquisition of these shares gave Pandini Ltd significant influence over Amani Ltd. At this date, the equity of Amani Ltd consisted of:

At 1 July 2016, all the identifiable assets and liabilities of Amani Ltd were recorded at amounts equal to their fair values except for: 

The plant was considered to have a further useful life of 5 years. The land was revalued in the records of Amani Ltd and the revaluation model applied in the measurement of the land. The tax rate is 30%.

At 30 June 2018, Amani Ltd reported the following information:



Profit before tax


Income tax expense


Profit after tax


Retained earnings at 1 July 2017




Dividends paid


Dividends declared


Transfer to general reserve




Retained earnings at 30 June 2018


Share capital


General reserve


Asset revaluation surplus


Total equity



3. Accounting for foreign currency transactions

Soul Ltd is an Australian company that makes and sells small electronic goods and its financial year ends on 30 June. On 1 February 2018, a customer from the United States ordered some goods from Soul Ltd at an invoice cost of US$400,000 on terms FOB destination. On 30 April 2018, the goods were delivered to the customer. The agreed payment arrangements are that 30% of the total amount owing would be paid on delivery, 20% three months after delivery, and the remaining 50% four months after delivery. The end of the reporting period for Soul Ltd is 30 June. The following exchange rates are applicable.

1 February 2018

A$1 = US$0.77

30 April 2018

A$1 = US$0.75

30 June 2018

A$1 = US$0.70

31 July 2018

A$1 = US$0.74

31 August 2018

A$1 = US$0.78 

Amani Ltd also reported other comprehensive income relating to gains on revaluation of land of $10,000.

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