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Presentation/PPT
27/08/2022
Question 3 (27 Marks)
Aussie Ltd gained control of Fiji Ltd by acquiring all its shares on I July 2010. The equity at that date was:
Share capital $100 000
Retained earnings 35 000
At 1 July 2010, all the identifiable assets and liabilities of Fiji Ltd were recorded at fair value except for:
Carrying amount Fair value
Inventory 18 000 22 000
Land 120 000 130 000
Plant (cost $120 000) 95 000 98 000
The inventory was all sold by 30 June 2011. The plant had a further 5 – year life but was sold on 1 January 2013 for $50 000. The land was sold in March 2011 for $150 000.
Where revalued assets are sold or fully consumed, any associated amounts in the business combination valuation reserve are transferred to retained earnings. At 1 July 2010, Fiji Ltd had guaranteed a loan taken out by Swede Ltd. Fiji Ltd had not raised a liability in relation to the guarantee but, as Swede Ltd was not performing well, Aussie Ltd valued the contingent liability at $5000. in January 2013, Swede Ltd repaid the loan. Fiji Ltd had also invented a special tool and patented the process. No asset was raised by Fiji Ltd, but Aussie Ltd valued the patent at $6000, with an expected useful life of 6 years. The tax rate is 30%.
Financial information for these companies for the year ended 30 June 2013 is as follows:
Aussie Ltd Fiji Ltd
Profit before tax 50 000 15 000
Income tax expense (20 000) (6 000)
Profit for the year 30 000 9 000
Other recognized income and expense:
Gains on plant revaluation 6 000 0
Available-for-sale financial assets (4 000) (10 000)
Total recognized income and expense for the year 32 000 (1 000)
Profit 30 000 9 000
Retained earnings (1 July 2012) 37 000 45 000
67 000 54 000
Dividend paid 20 000 –
Transfer to general reserve – 20 000
20 000 20 000
Retained earnings (30 June 2013) 47 000 34 000
Share capital 150 000 100 000
General reserve 12 000 20 000
Asset revaluation reserve 20 000 –
Retained earnings 47 000 34 000
Other components of equity 10 000 4 000
Total equity 239 000 158 000
Payables 19 000 8 000
Loan 25 000 –
Total liabilities 44 000 8 000
Total equity and liabilities 283 000 166 000
Cash 5 000 14 000
Available-for-sale financial assets 10 000 5 000
Inventory 30 000 21 000
Plant and equipment 140 000 163 000
Accumulated depreciation (62 000) (37 000)
Shares in Fiji Ltd 160 000 –
Total assets 283 000 166 000
The transfer to general reserve during the year ended 30 June 2013 was from profits earned before 1 July 2010.
Required
Prepare the consolidated financial statements for Aussie Ltd as at 30 June 2013. Your answer should include all consolidation adjustment journal entries and a consolidation worksheet.
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