Corporate Accounting Systems Consolidated Financial Statements with Non-Controlling Interests

Corporate Accounting Systems
Consolidated Financial Statements with Non-Controlling Interests
Spring 2016
INSTRUCTIONS
1. The assignment is to be submitted as an individual attempt. It must be prepared using Excel spreadsheet and be entirely your own work from this semester only – i.e. do not use or copy any file, in whole or in part, from any previous semester or from any other person. Each student must individually create a new excel file for this assignment and use their student number as the file name.
2. The assignment marking guide can be found as the last two pages of this document. Print these pages and complete the appropriate details. Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well you have met the expected standards (performance levels) for the criteria identified.
3. Your submission needs to be printed on A4 paper, single-sided, and the pages must be stapled at the top left hand corner only. Do not bind your assignment, nor put it in a folder or a plastic sleeve. The first page must be a completed and signed cover sheet and the last page should be the two marking sheets with your student ID and name shown. The marker will use the marking sheet to calculate your assignment result and provide you with feedback on the standard you achieved against each of the criteria.
4. The printed assignment is to be submitted to your tutor during the first 10 minutes of your usual tutorial class in Week 11 beginning 26 September 2016. Submissions made during the tutorial, but after the 10 minute deadline, will be penalised by the deduction of 1 mark. Assignments not submitted at the registered tutorial class will be regarded as “late”. Students will need to contact the unit coordinator about the process for late submission, if necessary. All late submissions will be penalised as per UWS policy – a deduction of 2 marks (being, 10% of the possible mark) for each day, or part day, late. Submissions will not be accepted by email. If you cannot attend at your normal tutorial time you need to either send it along with a fellow classmate or personally hand it to your tutor before the class in which it is due – you would need to make arrangements directly with them about organising this.
5. After handing in the printed copy, the excel file must also be uploaded to vUWS by 5pm on Friday 3Oth September 2016 at the latest. Further instructions on this process will be provided on vUWS closer to the due date. The Excel file MUST EXACTLY MATCH the printed version and not be modified after the submitted version was printed. Uploading a file that doesn’t match exactly, or failing to upload the excel file on time, will result in a zero grade. The file will be checked against other students’ submissions for potential plagiarism.
6. Marks will be lost for poor quality presentation, for incorrect work, and for missing work. The presentation of the financial statements must follow the format of the examples in the end-of-chapter exercise in chapter 29 of the textbook.
7. Staff will not assist students with their answers, nor review draft answers to confirm if students are “on the right track” or not. Any queries about the requirements of the assignment must be directed to the Unit Coordinator only, not to other teaching staff.
8. All students will be required to self-mark their assignment and submit their marking sheet with their hard copy failure to do so will result in a 2 mark deduction to their overall result.

QUESTION
Using the information below and on the next two pages, prepare the following as at 30th June 2015:
PART A: Consolidation adjustment/elimination journal entries that are required at the above financial year end date (i.e. for one year only); and
PART B: A detailed calculation of non-controlling interest balance and consolidation worksheet; and
PART C: Consolidated financial statements and statements of changes in equity for both the the group and parent.
THE FOLLOWING EVENTS OCCURRED:
During the year ended 30 June 2013:
1. On 1 September 2012 Ivy Ltd created a group entity when it purchased 65% of the issued capital of Rose Ltd. On acquisition, Rose’s Ltd’s accounts showed: Share capital $200,000 and Retained earnings $46,000. All assets and liabilities appearing in Rose Ltd’s financial statements were fairly valued, except:
• One of their blocks of land was recorded at $40,000 when its fair value was judged by the group to be $90,000. During the following financial year this land was sold for $120,000 cash.
• An item of plant was undervalued by $30,000. At that time it had a remaining life of 5 years and accumulated depreciation of $20,000. The plant is still an asset of Rose Ltd at 30 June 2015.
• A contingent liability relating to an unsettled legal claim with a fair value of $60,000 was recorded in the notes to the financial statements. This amount will be tax deductible when paid. The court case is still in progress at 30 June 2015.
During the year ended 30 June 2014:
2. On 1 July 2013 Rose Ltd sold an item of plant to Ivy Ltd for $60,000. The plant had cost $64,000 when purchased on 31 December 2012. It’s expected useful life was originally 5 years and this original estimate is still considered to be valid. The plant is still an asset of Ivy Ltd at 30 June 2015.
3. During the year Ivy Ltd made sales of inventory to Rose Ltd of $62,000. The inventory balance of Rose Ltd at the end of the year included stock of $52,000 acquired from Ivy Ltd.
4. Ivy Ltd declared and paid dividends of $70,000 for the year. Rose Ltd did not declare or pay any dividends for the year.
During the year ended 30 June 2015:
5. On 1 November 2014 Ivy Ltd sold an item of plant to Rose Ltd for $90,000 when its carrying value in Ivy’s books on that date was $108,000 (original cost $180,000 and original estimated life of 5 years). The plant is still an asset of Rose Ltd at 30 June 2015.
6. During the year Rose Ltd made sales of inventory to Ivy Ltd of $44,400. The inventory balance of Ivy Ltd at the end of the year included stock of $21,200 acquired from Rose Ltd.
7. The management of Ivy Ltd believes that the goodwill acquired on acquisition of Rose Ltd was impaired by $9,000 in the current year. This is in addition to a total of $15,000 of impairment in previous years.
8. Ivy Ltd charged management fees to Rose Ltd.
9. Dividends were declared/paid by both companies.
10. Non-controlling interests in Rose Ltd to be recognised. This is the only subsidiary in the group.

ADDITIONAL INFORMATION:
• The company tax rate is currently 30% and it has been this rate for many years.
• Ivy Ltd has the following accounting policies for the group:
(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary;
(ii) Intragroup sales of inventory to be at a selling price of cost plus a mark-up of 30%;
(iii) Plant is depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the asset is held in the relevant year.
(iv) All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements.
(v) The management of Ivy Ltd values any non-controlling interest at the proportionate share of Rose Ltd’s identifiable net assets.
NOTE:
• You MUST number your journal entries and present them in the order as they relate to the number given for each “Event”. Where more than one journal is needed for an “Event” to be completely accounted for add the letters a,b,c,…etc to them as necessary. [For example, if three separate journal entries are required to fully record the information detailed in point number 1, then the first journal will be 1a and the second is to be 1b and the third 1c.] Short narrations are expected for each journal entry. Marks will be lost if journals are not presented in a clear and professional manner (i.e. poor or unclear presentation can include showing the debit entry on one page but the credit entry on another, or not clearly distinguishing between debit and credit entries).
• The required statements for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Follow the formats shown in Chapter 29 of the textbook. Notes to the statements are not required. Marks will be lost if statements are not presented in a clear and professional manner (i.e. poor or unclear presentation can include splitting the reports over two pages, so start each statement on a new page!).
• You may “cut and paste” the financial information on the next page into your excel file, but no other information is to be copied into your file from anywhere else.
• You are expected to use at least the basic formula functions in Excel when preparing worksheets and financial statements (i.e. use Excel formulas to add totals and sub-totals etc, rather than calculating values manually and then just typing them in to the spreadsheet!).
• This is the final unit in the accounting major where you will have to produce complex journal entries and financial reports at a professional level. Therefore, a very high standard is expected. Approach it as if you are preparing it for your employer. The reports cannot be late for the board meeting and the directors carefully review all of the information you give them. They pay you well, but they expect quality work. It needs to be technically correct and presented well.

AT 30 JUNE 2015 IVY LTD ROSE LTD
$ $
INCOME STATEMENTS
Sales revenue 3,230,650 867,000
Cost of goods sold 1,934,000 480,200
Gross profit 1,296,650 386,800
Other income
Management fee revenue 36,000 –
Dividend revenue 96,000 –
Expenses
Depreciation expense -178000 -41,000
Management fee expense – -36,000
Loss on sale of asset -18,000 –
Other expenses -644,220 -97,010
Profit before tax 588,430 212,790
Income tax expense -59,000 -24,110
Profit for the year after tax 529,430 188,680
Retained earnings at start of year 392,400 178,600
Dividend paid/declared -125,000 -48,200
Retained earnings at year end 796,830 319,080

BALANCE SHEETS
Equity
Share capital 500,000 200,000
Retained earnings 796,830 319,080
Current Liabilities
Accounts payable 520,600 189,000
Income tax payable 24,000 18,000
Dividends payable 37,000 18,000
Non-Current Liabilities
Bank Loans 712,000 340,000
Provision for employee benefits 45,100 11,100
Deferred tax liability 8,200 –
2,643,730 1,095,180
Current Assets
Accounts receivable 575,300 205,000
Less: Allowance for doubtful debts -56,000 -20,500
Dividends receivable 48,000 –
Inventory 209,000 104,000
Non-Current Assets
Land and buildings 1,060,000 502,000
Plant – at cost 577,470 408,480
Accumulated depreciation – plant -189,000 -105,000
Deferred tax asset – 1,200
Shares in Joey Pty Ltd 18,960 –
Investment in Rose Ltd 400,000 –
2,643,730 1,095,180

200109 CORPORATE ACCOUNTING SYSTEMS SELF -MARKED ASSIGNMENT MARKING CRITERIA & STANDARDS – SPRING 2016
CRITERIA UNSATISFACTORY BELOW EXPECTATIONS MEETS MINIMUM EXPECTATIONS FOR A PASS EXCEEDS MINIMUM EXPECTATIONS SIGNIFICANTLY EXCEEDS EXPECTATIONS
A. Journal entries:
Correctness and
Completeness
of journals Four+ Events not correctly recorded and/or missing and/or included incorrectly
? 1 mark Three Events not correctly recorded and/or missing and/or included incorrectly
? 3 marks Two Events not correctly recorded and/or missing and/or included incorrectly
? 5 marks One Event not correctly recorded and/or missing and/or included incorrectly
? 7 marks Every required journal is correct, with none missing or included incorrectly
? 9 marks
Presentation
Numbering
Narrations
of journals Three or more journals are not presented clearly and/or not complete and/or not numbered correctly
? 0 marks One or two journals not presented clearly and/or not complete and/or not numbered correctly
? ½ mark All journals are presented clearly and numbered correctly. All narrations are complete and informative
? 1 mark
B. Consolidation Worksheet and Non-Controlling Interest Calculation:
Non-Controlling Interest Calculation Four+ errors and/or total does not agree to the Balance Sheet
? 0 marks Three errors but total agrees to the Balance Sheet
? ½ mark Two errors but total agrees to the Balance Sheet
? 1½ marks One error but total agrees to the Balance Sheet
? 2½ marks Presented well, no errors and agrees to the Balance Sheet
? 3 marks
Consolidation Worksheet Poor presentation and/or not balanced due to errors and/or missing entries
? 0 marks Not clearly presented but does balance.
? 1 mark Clearly presented. No errors and/or missing entries
? 2 marks
C. Consolidated Financial Statements
Presentation of Comprehensive Income Statements & Balance Sheets
(for both Group and Parent) Poor presentation and/or more than three errors and/or missing headings or amounts
? 0 marks Not acceptably presented and/or three errors and/or missing headings or amounts
? ½ mark Acceptably presented, but with two errors and/or missing headings or amounts
? 1½ marks Acceptably presented, but with one error and/or missing heading or amount
? 2 marks Correctly presented. No errors and/or missing headings or amounts
? 3 marks
Statements of Changes in Equity
(for both Group and Parent) One or more errors and/or does not agree to the Balance Sheet
? 0 marks Could be presented more clearly but agrees to the Balance Sheet
? 1½ marks Clearly presented and agrees to the Balance Sheet
? 2 marks
Deductions: 1. Late submission of printed or electronic version ? -10% per day 2. Electronic version not same as printed version ? -50%
STUDENT ID: STUDENT NAME: FINAL MARK: / 20
[NOTE: Errors flowing from earlier incorrect journals, etc will not be treated as further errors]
200109 CORPORATE ACCOUNTING SYSTEMS ASSIGNMENT MARKING CRITERIA & STANDARDS – SPRING 2016
CRITERIA UNSATISFACTORY BELOW EXPECTATIONS MEETS MINIMUM EXPECTATIONS FOR A PASS EXCEEDS MINIMUM EXPECTATIONS SIGNIFICANTLY EXCEEDS EXPECTATIONS
D. Journal entries:
Correctness and
Completeness
of journals Four+ Events not correctly recorded and/or missing and/or included incorrectly
? 1 mark Three Events not correctly recorded and/or missing and/or included incorrectly
? 3 marks Two Events not correctly recorded and/or missing and/or included incorrectly
? 5 marks One Event not correctly recorded and/or missing and/or included incorrectly
? 7 marks Every required journal is correct, with none missing or included incorrectly
? 9 marks
Presentation
Numbering
Narrations
of journals Three or more journals are not presented clearly and/or not complete and/or not numbered correctly
? 0 marks One or two journals not presented clearly and/or not complete and/or not numbered correctly
? ½ mark All journals are presented clearly and numbered correctly. All narrations are complete and informative
? 1 mark
E. Consolidation Worksheet and Non-Controlling Interest Calculation:
Non-Controlling Interest Calculation Four+ errors and/or total does not agree to the Balance Sheet
? 0 marks Three errors but total agrees to the Balance Sheet
? ½ mark Two errors but total agrees to the Balance Sheet
? 1½ marks One error but total agrees to the Balance Sheet
? 2½ marks Presented well, no errors and agrees to the Balance Sheet
? 3 marks
Consolidation Worksheet Poor presentation and/or not balanced due to errors and/or missing entries
? 0 marks Not clearly presented but does balance.
? 1 mark Clearly presented. No errors and/or missing entries
? 2 marks
F. Consolidated Financial Statements
Presentation of Comprehensive Income Statements & Balance Sheets
(for both Group and Parent) Poor presentation and/or more than three errors and/or missing headings or amounts
? 0 marks Not acceptably presented and/or three errors and/or missing headings or amounts
? ½ mark Acceptably presented, but with two errors and/or missing headings or amounts
? 1½ marks Acceptably presented, but with one error and/or missing heading or amount
? 2 marks Correctly presented. No errors and/or missing headings or amounts
? 3 marks
Statements of Changes in Equity
(for both Group and Parent) One or more errors and/or does not agree to the Balance Sheet
? 0 marks Could be presented more clearly but agrees to the Balance Sheet
? 1½ marks Clearly presented and agrees to the Balance Sheet
? 2 marks
Deductions: 1. Late submission of printed or electronic version ? -10% per day 2. Electronic version not same as printed version ? -50% 3. Unmarked ? -2
STUDENT ID: STUDENT NAME: FINAL MARK: / 20
[NOTE: Errors flowing from earlier incorrect journals, etc will not be treated as further errors]