ACCT6005 Company accounting Assessment 3 Case study Part A Assignment instructions: This assignment can be completed using either Word or Excel. Please ensure that your file name contains your student ID and your full name. If you are using Excel please use a separate sheet within the one file for each assignment part (a), (b) and (c). A list of entries are not required, however I recommend you prepare these as part of your workings before attempting the worksheet. These can also be submitted however marks will not be allocated. Please ensure that you use the ‘Ref’ column in the worksheet to identify each separate consolidation entry. Case study: On 1 July 2018, Joel Ltd acquired all the shares of Billy Ltd for $425 000 on an ex-div. basis. On this date, the equity and liabilities of Billy Ltd included the following balances: Share capital$100,000General reserve 25,000Retained earnings 145,000Dividend Payable 8,000 At acquisition date, all the identifiable assets and liabilities of Billy Ltd were recorded at amounts equal to fair value except for: Carrying amountFair valuePlant and equipment (cost $500,000)$400,000$404,000Patent200,000210,000Inventories30,00040,000Land50,00070,000Machinery (cost $120,000)90,00091,000 The plant and equipment had a useful life of 5 years at acquisition date and was expected to be used evenly over that time. The patent was considered to have an indefinite life. The machinery had a further 4-year useful life at acquisition date. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation. During the year ended 30 June 2019, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2020. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed. (Continued on next page) Additional information On 1 July 2019, Billy Ltd has on hand inventory worth $24 000, being transferred from Joel Ltd in June 2019. The inventory had previously cost Joel Ltd $20 000.On 30 April 2020, Billy Ltd transferred an item of plant with a carrying amount of $65 000 to Joel Ltd for $85 000. Joel Ltd treated this item as inventory. The item was still on hand at the end of the year. Billy Ltd applied a 20% depreciation rate to this plant.On 1 March 2020, Billy Ltd acquired $9 000 inventory from Joel Ltd. This inventory originally cost Joel Ltd $5000. 75% of this inventory has been sold to external parties for $15,000.On 1 January 2019, Joel Ltd sold furniture to Billy Ltd for $18,000. This furniture had originally cost Joel Ltd $22 000 and had a carrying amount at the time of sale of $17,000. Both entities charge depreciation at a rate of 20% p.a.Joel Ltd sold some land to Billy Ltd in 31 December 2019. The land had originally cost Joel Ltd $85 000, but was sold to Billy Ltd for only $80 000. To help Billy Ltd pay for the land, Joel Ltd gave Billy Ltd a loan of $326 000. Billy Ltd has not made any repayments on the loan. Interest is charged at 15% on the loan and the last interest payment was made on 31 March 2020. The corporate tax rate is 30%. Required: Prepare the acquisition analysis as at 1 July 2018 for Joel Ltd. (8 marks)Prepare the consolidation worksheet for Joel Ltd as at 30 June 2020, using the attached template. (81 marks)Prepare a consolidated statement of financial position using account format, for Joel Ltd as at 30 June 2020. (11 marks) Part A: Total marks = 100 Weighted total marks = 40 (Continued on next page- Please see attached worksheet on pages 3-5) Financial Statements as at 30 June 2020JoelBillyAdjustmentsJoel Ltd GroupLtdLtdRefDr ($)RefCr ($)($)Sales revenue 220,000 212,000 Dividend income 62,000 20,000 Interest income 30,000 312,000 232,000 Cost of sales 162,000 128,000 Other expenses 83,000 71,000 Total expenses 245,000 199,000 Trading profit 67,000 33,000 Gains/losses on sale of non-current assets 22,000 25,000 Profit before tax 89,000 58,000 Tax expense 26,700 17,400 Profit after tax 62,300 40,600 Financial Statements as at 30 June 2020JoelBillyAdjustmentsJoel Ltd GroupLtdLtdRefDr ($)RefCr ($)($)Retained earnings 30,000 145,000 (1/7/19) Transfer from BCVR reserve – – Dividend paid 12,000 7,000 Dividend declared 6,000 14,000 Retained earnings 30/6 74,300 164,600 Share capital 312,000 100,000 General reserve 20,000 25,000 BCVR – – Total Equity 406,300 289,600 Deferred tax liabilities – – Interest Payable – 12,225 Dividend payable 20,000 14,000 Current tax liability 322,000 102,500 Loan from Joel Ltd – 326,000 Accounts Payable 196,925 246,900 Total Liabilities 538,925 701,625 Total Liabilities + Equity 945,225 991,225 Financial Statements as at 30 June 2020JoelBillyAdjustmentsJoel Ltd GroupLtdLtdRefDr ($)RefCr ($)($)Shares in Billy Ltd 425,000 — Cash 7,800 35,000 Inventory 20,000 50,000 Dividend Receivable 14,000 3,000 Interest Receivable 12,225 – Accounts Receivable 6,000 32,225 Land 25,000 50,000 Plant & equipment 113,000 500,000 Accumulated depreciation – Plant (34,000) (100,000) Machinery 15,000 120,000 Accumulated depreciation – Machine (1,000) (30,000) Furniture 7,000 8,000 Accumulated depreciation – Furniture (1,000) (2,000) Patent 200,000 Goodwill – 125,000 Deferred tax assets 10,200 Loan to Billy Ltd 326,000 – Total assets 945,225 991,225
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