| 1/07/2017 | Chief Ltd acquired: | 100% | | |
| | of the issued shares of Sub Ltd for: | $2,460,000 | | |
| | | | | |
| | At the date of acquisition, the shareholders equity of Sub Ltd consisted of: | | | |
| | Share capital | $1,107,000 | | |
| | General Reserve | $276,800 | | |
| | Retained earning | $207,540 | | |
| | Total Equity | $1,591,340 | | |
| | | | | |
| 30/06/2020 | the accounts of the two companies appear as follows: | | | |
| | | Chief Ltd | Sub Ltd | |
| | | $ | $ | |
| | Sales | 3,936,000 | 1,983,000 | |
| | Cost of Goods Sold | 2,361,600 | 1,288,900 | |
| | Depreciation expenses | 196,800 | 99,100 | |
| | Interest expenses | 157,400 | 51,660 | |
| | Other expenses | 388,300 | 71,240 | |
| | | | | |
| | Other Income | | | |
| | Interest revenue | 77,400 | 0 | |
| | Dividend revenue | 215,200 | 0 | |
| | | | | |
| | Income tax expense | 337,300 | 141,600 | |
| | Net Profit after Tax | 787,200 | 330,500 | |
| | Retained earnings (01/07/2019) | 1,180,800 | 345,900 | |
| | Available for appropriation | 1,968,000 | 676,400 | |
| | | | | |
| | Interim dividend paid | 184,500 | 92,200 | |
| | Final dividend declared | 307,500 | 123,000 | |
| | Retained earnings (30/06/2020) | 1,476,000 | 461,200 | |
| | | | | |
| | Share Capital | 3,198,000 | 1,107,000 | |
| | General reserve | 246,000 | 276,800 | |
| | Total Owner's Equity | 4,920,000 | 1,845,000 | |
| | | | | |
| | Debentures (due 30/06/2022) | 0 | 369,000 | |
| | Dividend payable | 307,500 | 123,000 | |
| | Deferred Tax Liability | 369,000 | 30,700 | |
| | Other liabilities | 553,500 | 92,300 | |
| | Total Liabilities | 1,230,000 | 615,000 | |
| | | | | |
| | Total Liabilities & Owner's Equity | 6,150,000 | 2,460,000 | |
| | | | | |
| | | | | |
| | Assets | | | |
| | Dividend receivable | 123,000 | 0 | |
| | Inventory | 861,000 | 147,600 | |
| | Non-current assets (depreciable) | 1,660,500 | 984,000 | |
| | Accumulated depreciation | -664,200 | -196,800 | |
| | Land | 1,045,500 | 984,000 | |
| | Investment in Sub Ltd | 2,460,000 | 0 | |
| | Debentures in Sub Ltd | 369,000 | 0 | |
| | Other assets | 295,200 | 541,200 | |
| | Total Assets | 6,150,000 | 2,460,000 | |
| | | | | |
| | Additional information: | | | |
| | a) At date of acquisition, all identifiable net assets of Sub Ltd were recorded at fair value, with the exception of a block of land in the books of Sub Ltd. | | | |
| | The block of land had a carrying value of: | $984,000 | | |
| | and a fair value of: | $1,370,000 | | |
| | | | | |
| | b) The directors apply the impairment test for goodwill annually. | | | |
| 30/06/2020 | The directors have determined the goodwill should be completely written off. | | | |
| | The cumulative goodwill impairment write-downs for prior years totalled: | $478,000 | | |
| | | | | |
| 1/07/2018 | c) A non-current asset owned (Plant) by Chief Ltd was sold to Sub Ltd. | | | |
| | Cost of the asset was: | $440,000 | | |
| | Accumulated depreciation of the asset was: | $157,000 | | |
| | The asset was sold for: | $393,000 | | |
| | Sub Ltd estimated this item had a remaining useful life of: | 4 | years | |
| | and residual value of: | $0 | | |
| | | | | |
| | d) The opening inventory of Chief Ltd includes unrealised profit of: | $258,000 | | |
| | on inventory transferred from Sub Ltd during the prior financial year. | | | |
| 30/06/2020 | all of this inventory was sold by Chief Ltd to parties external to the Group. | | | |
| | | | | |
| | e) During the current year, Chief Ltd purchased inventory from Sub Ltd for: | $1,119,000 | | |
| | This inventory had previously cost Sub Ltd: | $447,000 | | |
| | Percentage of this inventory sold to outsiders by Chief Ltd during the year was: | 50% | | |
| | | | | |
| | f) Chief Ltd holds debentures in Sub Ltd amounting to: | $369,000 | | |
| 30/06/2020 | Sub Ltd paid the annual interest in debentures at a rate of: | 14% | | |
| | | | | |
| | g) Chief Ltd holds no investment in shares except for those held in Sub Ltd. Accordingly, examination of the dividend revenue and dividend receivable accounts in Chief Ltds financial statements indicates that Chief Ltd has recognised dividend revenue prior to receipt. | | | |
| | | | | |
| | h) The tax rate is: | 30% | | |
| | | | | |
| | | CONSOLIDATED JOURNAL ENTRIES: | | | | | | | | | | | | | | | Acqusition Information | | | | | Ownership | | 100% | | | Acquirer: | | Chief Ltd | | | Acquiree: | | Sub Ltd | | | Acqusition Date: | | 1/07/2017 | | | Consolidation Date: | | 30/06/2020 | | | Years since acqusition | | 3 | | | Tax Rate | | 30% | | | | | | | | Consolidation Date Information | | | | | Share Capital of Sub Ltd on Date of Acquisition | | $1,107,000 | | | Revaluation Reserve of Sub Ltd on Date of Acquisition | | $0 | | | General Reserve of Sub Ltd on Date of Acquisition | | $276,800 | | | Retained Earnings of Sub Ltd on Date of Acquisition | | $207,540 | | | Dividend Declared by Sub Ltd | | $123,000 | | | Dividend Paid by Sub Ltd | | $92,200 | | | Total goodwill written off for prior years | | $478,000 | | | | |
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| | I can't include everything on one post - its not letting me. please advise how else I can send the full question. I have also posted the other figures separately as another question | | | |
| | *** all figures are included please scroll tp the right to see figures | | | |
