ASSIGNMENT
On 1 July 2012, Strong Ltd acquired all the share capital of Weak Ltd for $700 000. At that date, Weak Ltd's equity consisted of the following:
Share capital $ 500 000
General reserve 100 000
Retained earnings 50 000
At 1 July 2012, all the identifiable assets and liabilities of Weak Ltd were recorded at fair value.
Financial information for Strong Ltd and Weak Ltd for the year ended 30 June 2017 is presented in the left-hand columns of the worksheet. It is assumed that both companies use the perpetual inventory system.
Additional information
(a) During the 2016-17 year, Weak Ltd paid a dividend of $30 000 from profits earned before 20 June 2012.
(b) On January 1 2017, Weak Ltd sold merchandise costing $40 000 to Strong Ltd for $50 000. Half this merchandise was sold to external entities for $30 000 before 30 June 2017.
(c) It is estimated that goodwill acquired in Weak Ltd has been impaired by an amount of $7 000
(d) Strong Ltd sells plant to Weak Ltd for $8 500. This plant had an initially cost Strong Ltd $15 000, is 5 years old and has accumulated depreciation of $8000 at the date of sale. The remaining useful life is assessed as 7 years.
(e) At July 1 2016, there was a profit in the inventory of Strong Ltd of $4000 on goods acquired from Weak Ltd in the previous period.
(f) The tax rate is 30%.
Using Microsoft Excel you are required to,
a. Prepare the acquisition analysis on 1 July 2012;
b. Prepare consolidation journal entries for the period ended at 30 June 2017;
c. Prepare the consolidation worksheet for the period ended 30 June 2017;
d. Prepare the Consolidated Financial Statements for the year ended 30 June 2017.
Financial statements
|
StrongLtd
|
Weak Ltd
|
Adjustments
|
Consolidation
|
|
|
|
Dr
|
Cr
|
|
Sales revenue
|
2 000 000
|
928 000
|
|
|
|
Cost of sales
|
(700 000)
|
(670 000)
|
|
|
|
Wages and salaries
|
(61 000)
|
(32 000)
|
Depreciation
|
(5 100)
|
(4 800)
|
Other expenses
|
(5 500)
|
-
|
Total expenses
|
(771 600)
|
(706 800)
|
|
|
|
|
1 228 400
|
221 200
|
|
|
|
Profit from sale of plant
|
800
|
-
|
|
|
|
Other income
|
30 000
|
|
Legal fees
|
(3 500)
|
-
|
|
|
|
Profit before income tax
|
1 255 700
|
221 200
|
|
|
|
Income tax expense
|
(367 710)
|
(88 480)
|
Profit for the year
|
887 990
|
132 720
|
|
|
|
Retained earnings
|
70 820
|
70 280
|
(1/7/16)
|
|
|
|
958 810
|
203 000
|
|
|
|
Dividend paid
|
(123 710)
|
(30 000)
|
Retained earnings
|
|
|
|
|
|
(30/6/17)
|
835 100
|
173 000
|
Share capital
|
600 000
|
500 000
|
General reserve
|
120 000
|
100 000
|
|
1 555 100
|
773 000
|
|
|
|
Other components of
|
|
|
|
|
|
equity (1/7/16)
|
10 000
|
10 000
|
Avail-for-sale fin assets
|
1 000
|
3 000
|
Other components of equity (30/6/17)
|
11 000
|
13 000
|
|
|
|
Total equity
|
1 566 100
|
786 000
|
|
|
|
Deferred tax liability
|
60 000
|
30 000
|
Total equity and liabilities
|
1 626 100
|
816 000
|
|
|
|
Shares in Weak Ltd
|
700 000
|
-
|
|
|
|
Cash
|
200 000
|
277 000
|
Inventory
|
370 000
|
36 000
|
Other current assets
|
15 100
|
300 000
|
Avail-for-sale fin assets
|
41 000
|
68 000
|
Land
|
230 000
|
120 000
|
Plant and equipment
|
100 000
|
28 000
|
Accum Depcn & Impair
|
|
|
losses
|
(30 000)
|
(13 000)
|
Goodwill
|
-
|
-
|
Goodwill- Accum Impair
|
|
|
Loss
|
-
|
-
|
Deferred Tax Asset
|
|
|
|
1 626 100
|
816 000
|
|
|
|