Financial Accounting Assignment-
Part 1 -
Task details:
Monash Cow Ltd operates dairy farms across different locations of Victoria. Since the start of its operation in 1981, the firm's business has been rapidly growing and it has become one of the largest players in this segment. The company runs a number of factories that are used to produce milk products that are then sent to other factories to be converted into milk-based products such as yoghurt, custard, and etc. In applying AASB 136 Impairment of Assets, the accountant of Monash Cow Ltd, James Dodd, is concerned about correctly identifying the cash-generating units (CGUs) for the company. The accountant has sought your advice on such questions as to whether the milk production section is a separate CGU even though the company does not sell milk directly to other parties, or whether it should be included in the milk-based products CGU.
Required: As a consultant hired by the company, you are requested to provide some suggestions for the accountant of Monash Cow Ltd. Inareporttotheaccountant, you need to:
a) Explain the general definition of CGU;
b) Explain why impairment testing requires the use of CGUs, rather than being based on single assets; and
c) Explain the factors that the accountant of Monash Cow Ltd, James Dodd, might need to consider in determining the CGUs for his company.
Presentation requirements:
- Try your best to construct your report as effective as possible.
- Use a font size of 12 point. World limit is 750 words.
- If necessary, include any citations and references. Monash University's online citation and referencing guide can be accessed at: https://www.lib.monash.edu.au/tutorials/citing/harvard.html
Part 2 -
On 1 July 2011, Parent Ltd acquired 100% of the share capital of Son Ltd for $ 1,000,000. At that time, the equity of Son Ltd consisted of:
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Share capital
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$ 600,000
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General reserve
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170,000
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Retained earnings
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80,000
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All the identifiable assets and liabilities of Son Ltd were recorded at fair value except for:
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Carrying Amount
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Fair Value
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Land
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$ 550,000
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$ 600,000
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Plant and equipment
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$ 395,000
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$ 435,000
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On 1 July 2011, the plant and equipment had a further five-year life and was expected to be used evenly over that time. It originally cost $ 600,000, and had accumulated depreciation of $ 205,000 at 1 July 2011. The land on hand at acquisition date was sold to a third party in March 2015. The goodwill was impaired by $8,700 on 30 June each year since acquisition.
The following intra-group transactions have taken place:
(T1) On 10 June 2015, Son Ltd paid $60,000 to Parent Ltd for services rendered.
(T2) During the year ended 30 June 2014, Son Ltd sold inventory to Parent Ltd for $90,000. The inventory originally cost $80,000, and half was sold by 30 June 2014. The inventory has since been sold during the year ending 30 June 2015.
(T3) During the year ended 30 June 2015, Son Ltd sold inventory to Parent Ltd for $108,000. There was a $16,000 mark-up on the cost. All inventory remains on hand at 30 June 2015.
(T4) On 1 July 2012, Parent Ltd sold computers to Son Ltd for $50,000. At the time of transfer, the computers had a carrying amount of $44,000 in the books of Parent Ltd. The computers have five years of life remaining (For depreciation of non-current assets, Parent Ltd and Son Ltd use straight line method)
(T5) On 1 March 2015, Son Ltd sold equipment to Parent Ltd for $55,000, this asset having a carrying amount at the time of sale of $46,000. Son Ltd had treated the asset as a depreciable non-current asset, being depreciated at 15% on cost, whereas Parent Ltd records the equipment as inventory. Parent Ltd sold this asset to a third party on 12 June 2015 for $61,500.
(T6) On 1 January 2015, Son Ltd acquired furniture for $45,000 from Parent Ltd. The furniture had originally cost Parent Ltd $62,000 and had a carrying amount at the time of sale of $48,000. The sale was made on credit and, at 30 June 2015, $4,500 was still outstanding. Both entities apply depreciation at a rate of 10% p.a. straight line.
Required:
(a) Prepare an acquisition analysis at 1 July 2011.
(b) Prepare the revaluation and pre-acquisition journal entries at 30 June 2015.
(c) Prepare the consolidation journal entries for intra-group transactions at 30 June 2015.
Presentation requirements:
- Try your best to construct your report as effective as possible.
- EnsureallintragrouptransactionadjustmentsarecorrectlylabelledasT1-T6.Failuretodoso will result in a mark deduction.
- Narrations must be provided. Show all workings.