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On 1 July 2007, Bella Ltd acquired all the issued shares of Edward Ltd for a consideration of $235,000

On 1 July 2007, Bella Ltd acquired all the issued shares of Edward Ltd for a consideration of $235,000
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On 1 July 2007, Bella Ltd acquired all the issued shares of Edward Ltd for a consideration of $235,000. On this date the share capital of Edward Ltd consisted of 100,000 shares paid to $1.50 per share. The remaining equity of Edward Ltd included: General Reserve $36,000 Retained Earnings $45,000 At the acquisition date, all the identifiable assets and liabilities of Edward Ltd were recorded at their fair value except for the following: Cost Carrying Amount Fair Value Inventory 81,000 81,000 90,000 Furniture & Fittings 62,000 42,000 45,000 Plant & Equipment 125,000 95,000 102,000 All the inventory on hand at the date of acquisition was sold to external parties by the end of September 2007. The furniture and fittings had a remaining useful life of six years and the plant and equipment had a remaining useful life of ten years. The fair value adjustments for both the inventory and the furniture and fittings were made on consolidation. Edward Ltd recognised the change in fair value for the plant and equipment in its own accounts. Additional information: a) Edward Ltd transferred $15,000 from retained earnings to general reserve on 30 June 2008. b) During May 2009, Edward Ltd sold an item of equipment to Bella Ltd for a before tax profit of $8,000. At the time of sale the carrying amount of this equipment was $42,000. Bella Ltd treats this equipment as inventory and all this inventory was still on hand at 30 June 2009 but all sold to external parties by December 2009. c) On 1 January 2010, Bella Ltd sold furniture to Edward Ltd for $18,000 at a before tax profit of $4,000. Edward Ltd depreciates furniture at 10% per annum. d) On 22 April 2010, Bella Ltd sold inventory to Edward Ltd for $12,500. This inventory had originally cost Bella Ltd $10,000. By 30 June 2010, one-fifth of this inventory was still on hand. e) Assume a tax rate of 30%. f) The trial balances for Bella Ltd and Edward Ltd as at 30 June 2010 are shown on the next page. The trial balances for both Bella Ltd and Edward Ltd as at 30 June 2010 were: Bella Ltd Edward Ltd DR CR DR CR Share Capita 600,000 150,000 General Reserve 187,500 51,000 Asset Revaluation Reserve (1 July 2009) 24,000 35,000 Retained Earnings (1 July 2009) 60,000 61,500 Dividend Paid 10,000 8,000 Dividend Declared 15,000 12,000 Sales Revenue 375,000 175,000 Other Income 30,000 42,500 Proceeds from Sale of Non-Currents Assets 21,000 82,000 Cost of Sales 260,000 118,500 Other Expenses 42,000 19,000 Carrying Amount of Non-Current Assets Sold 17,000 82,500 Income Tax Expense 32,100 23,850 Bank 170,250 69,630 Dividend Receivable 12,000 0 Other Receivables 52,500 22,750 Inventory 107,950 141,820 Deferred Tax Assets 19,050 9,450 Shares in Edward Ltd 235,000 0 Plant & Equipment 690,000 542,000 Accumulated Depreciation - P&E (450,000) (390,000) Furniture & Fittings 426,000 229,000 Accumulated Depreciation - F&F (140,000) (150,000) Current Tax Liabilities 120,000 61,500 Deferred Tax Liabilities 32,850 30,500 Dividend Payable 15,000 12,000 Other Payables 33,500 37,500 $1,498,850 $1,498,850 $738,500 $738,500 Required: Using the Microsoft Excel template that has been provided, prepare the consolidated financial statements for the year ended 30 June 2010. In the provided template, separate worksheets have been set up for the completion of each of the following: 1) Acquisition analysis at date of acquisition 2) All relevant consolidation journal entries for the year ending 30 June 2010 3) Note: When preparing these consolidation journal entries for 2010 it will be beneficial to use, as your workings, the consolidation journal entries at the date of acquisition and then for the years ending 30 June 2008 and 2009. 4) Consolidated worksheet for 30 June 2010 5) Consolidated Statement of Comprehensive Income for 30 June 2010 6) Consolidated Statement of Financial Position for 30 June 2010 NOTE: This question is NOT our property; we are only suggesting solution of this question.

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