ACCT2201 GROUP CASE STUDY

ACCT2201 GROUP CASE STUDY
On 1 July 2013 Black Ltd acquired all of the share capital of White Limited for $472000. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of:
ASSET Book Value Market Value
Inventory 10000 12000
Land 20000 25000
Plant 12000
(less depn)
-2000
10000 15000
In relation to the items above, the inventory was all sold by 30/6/14. The land was sold on 30/12/16 for $23000. The plant was still on hand at 30/6/17.
At the date of acquisition the equity of White Ltd consisted of:
Share Capital 300000
General Reserve 96000
Retained Earnings 56000
Information from the trial balances of Black Ltd and White Ltd at 30 June 2017 is presented overleaf.
Additional Information
1. On 1 Jan 2017 White Ltd sold inventory to Black Ltd costing $30,000 for $50,000. Half of this inventory was sold to outside parties for $28,000 by 30/6/2017.
2. On 1 Jan 2016 White Ltd sold inventory costing $2000 to Black Ltd for $4000. Black Ltd treats the item as equipment and depreciates it at 5% per annum.
3. In the period ended 30 June 2015 Black Ltd sold land to White Ltd for $40,000, which was $20,000 above cost. The land was still on hand at 30 June 2017.
4. At 1 July 2016 White Ltd held inventory that it had purchased from Black Ltd on 1 June 2016 at a profit of $6000.
5. Black Ltd accrues dividends from White Ltd once they are declared.
6. Black Ltd has earned $500 in interest revenue in the 2017 financial year from White Ltd.
7. Black Ltd has earned $2000 in service revenue in the 2017 financial year from White Ltd.
8. Assume a tax rate of 30%.
Required:
A. Prepare the acquisition analysis at 1 July 2013.
B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013.
C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017.
D. Prepare the consolidation worksheet journal entries to eliminate the effects of inter-entity transactions as at 30 June 2017.
E. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2017.
F. Prepare the consolidated statement of profit or loss and other comprehensive income, the consolidated balance sheet and the consolidated statement of changes in equity for the period ended 30 June 2017.
Presentation
Your work should be prepared using an Excel spreadsheet and saved as a PDF to be submitted via LMS by the due date.
Trial Balances As at 30 June 2017
Black Ltd White Ltd
DR CR DR CR
Sales Revenue 1192500 933500
Cost of Sales 888000 673000
Wages and Salaries 62500 32000
Depreciation Expense 5200 4800
Service Expense 2000 5000
Interest Expense
7,000
500
Other Expenses 4000 5000
Gain on Sale of NCA 0 3000
Service Revenue 5000 5000
Interest Revenue
500 7,000
Dividend Revenue 11000 0
Income tax expense 97120 118480
Retained Earnings 1/7/16 100820 70280
Dividend Paid 10000 5000
Dividend Declared 12000 6000
Share Capital 500000 300000
General Reserve 135000 96000
Other Equity 1/7/16 4000 12000
Gains on Financial Assets 1000 6000
Loan Payable to Black Ltd 0 5000
Deferred Tax Liability 52000 30000
Dividend Payable 12000 6000
Shares in White Ltd 472000 0
Cash
138,000
85,000
Inventories 168000 36000
Other Current Assets 10000 300000
Dividend Receivable 6000 0
Loan receivable from White Ltd 5000 0
Financial Assets 15000 68000
Plant and Equipment 52000 28000
Acc. Depreciation Plant 10000 13000
Land 70000 120000
2023820 2023820 1486780 1486780