Acquisition Analysis – Consolidation Journal Entries – Consolidated Worksheet

This assignment has been uploaded for a third time due to not getting a full mark. apparently it is a hard one so please make sure you have the knowledge to do it before accepting to work on it. I can extend the time for 12 hours if you needed. instructions are provided in the word file so you can work on the excel file

Assignment Instructions:
This assignment relates to Week 5 – Week 7 on Investment in
subsidiaries/ consolidations and requires the
following to be submitted:
An excel workbook with the following five (5) sheets:
• Sheet 1: Background Information
• Sheet 2: Part A – Acquisition Analysis
• Sheet 3: Part A – Consolidation Journal Entries
• Sheet 4: Part A – Consolidated Worksheet
• Sheet 5: Part B – Discussion Question on Control
Required:
(i) Prepare the acquisition analysis at the date of acquisition.
(Complete your answers in Sheet 2: Acquisition Analysis)
(ii) Record the consolidated journal entries necessary to prepare
consolidated accounts for the year ending
30/06/2023 for the group comprising Tie Ltd and Legato Ltd.
(Complete your answers in Sheet 3: Consolidated Journal Entries)
(iii) Complete the consolidated worksheet for the year ending
– Entering the consolidated journal entries in Part (ii) above to the
appropriate debit and credit
columns in the Consolidated Worksheet; and
– Clearly labelling the references for each of the adjustments in the
Consolidated Worksheet; and
– Completing the Group figures in the Consolidated Worksheet.
(Complete your answers in Sheet 4: Consolidated Worksheet)
(iv) Horizon Ltd holds 30% of the voting shares of Southland Ltd. The
balance of the voting shares (70%) are
held by Locky Ltd. Horizon Ltd also holds debt instruments in
Southland Ltd that are convertible into
voting shares of Southland Ltd at a fixed price that is ‘deeply in the
money’. If the debt was converted,
Horizon Ltd would hold 55% of the shares of Southland Ltd.
Required:
IFRS 10 / AASB 10 Consolidated Financial Statements focuses on
control as the key concept underlying
the parent/subsidiary relationship, explain the circumstances in which
an investor controls an investee
according to IFRS 10 / AASB 10. Now, consider the case of Southland
Ltd, explain whether either
Horizon Ltd or Locky Ltd should consolidate Southland Ltd in
accordance with IFRS 10 / AASB 10.
(Complete your answers in Sheet 5: Discussion Question)
Tips:
•
•
•
•
Determine goodwill in an acquisition ? (4 steps in an acquisition
analysis). Not sure how to do it? Week 5 workshop Q3 or Week 7
workshop Q1 could be a good start. (all attached)
Dates matter: Please pay particular attention to the relevant
DATES (e.g., date of the acquisition, financial reporting date,
transaction date).
o When should the elimination of journal entries be made? On
the date of acquisition only, or all subsequent reporting
years? When recording intra-group transactions, does it
matter which entity is the seller/purchaser in the
consolidation process?
o How do you account for prior year intra-group activities? If
an intra-group sale of depreciable asset was made two years
prior to the reporting year, how to account for the gain from
the sale and related depreciation expenses in current year’s
consolidation worksheet? If goodwill was impaired in prior
years, do we need to consider it in current year’s
consolidation worksheet? Not sure how to do it? Go back to
Week 7 workshop Q4 to refresh your memory.
Don’t forget the TAX!!!
For a final check: Is your worksheet/statements balanced?
Student ID
Input student ID
219395246
Part A – Consolidation Question
On 01/07/2019, Breve Ltd acquired 100% of the issued shares of Minim Ltd for:
At the date of acquisition, the Owners’ Equity of Minim Ltd consisted of:
Share capital
General Reserve
Retained earnings
$4,116,000
$1,852,200
$463,100
$347,220
$2,662,520
The accounts of the two companies appear as at 30/06/2023 are as follows:
Sales
less Cost of Goods Sold
Depreciation expense
Interest expense
Other expenses
Breve Ltd
$
6,586,000
3,951,600
329,300
263,400
598,700
Minim Ltd
$
3,318,600
2,157,000
165,900
52,445
153,155
Other Income
plus Interest revenue
Dividend revenue
78,600
360,100
0
0
less Income tax expense
Net Profit after Tax
Retained earnings (01/07/2022)
Available for appropriation
564,500
1,317,200
1,975,600
3,292,800
237,000
553,100
578,700
1,131,800
Interim dividend paid
Final dividend declared
Retained earnings (30/06/2023)
308,700
514,500
2,469,600
154,300
205,800
771,700
Share Capital
General Reserve
Total Owner’s Equity
5,350,800
411,600
8,232,000
1,852,200
463,100
3,087,000
Loan payable (due 30/06/2025)
Dividend payable
Deferred Tax Liability
Other liabilities
Total Liabilities
0
514,500
617,400
926,100
2,058,000
617,000
205,800
51,400
154,800
1,029,000
Total Liabilities & Owner’s Equity
10,290,000
4,116,000
Assets
Dividend receivable
Inventory
Property, Plant & Equipment
Accumulated depreciation
Land
Investment in Minim Ltd
Loan receivable
Other assets
Total Assets
205,800
1,440,600
2,778,300
-1,111,400
1,749,300
4,116,000
617,000
494,400
10,290,000
0
246,900
1,646,400
-329,300
1,646,400
0
0
905,600
4,116,000
Additional information:
(a) At date of acquisition, all identifiable net assets of Minim Ltd were recorded at fair value, with the exception of a item of Plant in the books of Minim
Ltd. The item of Plant had cost of $1,070,160, and an accumulated depreciation of $214,045. The management of Breve Ltd believed the item of
Plant had a fair value of $1,198,561 and a remaining useful life of 5 years.
Cost
Acc Dep
########
214,045 $1,198,561
(b) The directors apply the impairment test for goodwill annually. As at 30/06/2023, the cumulative goodwill impairment write-downs for prior years
totalled $1,090,000. During the current year, the goodwill has further been impaired by another $16,350.
Goodwill Impairment in prior periods
In current year
FV
Useful Life
########
(c) An item of Equipment owned by Minim Ltd was sold to Breve Ltd on 01/01/2020 for $376,691. The cost of the Equipment was $329,280 and its
accumulated depreciation was $65,860 at the time of trasnfer. Breve Ltd estimated this item had an annual depreciation rate of 10% with no
residual value.
$16,350
Cost
Acc Dep
$329,280
$65,860
Sold for
$376,691
(d) The opening inventory of Breve Ltd includes unrealised profit of $432,000 on inventory transferred from Minim Ltd during the prior financial year.
All of this inventory was sold by Breve Ltd to parties external to the Group by 30/06/2023.
Unrealised profit last year
(e) During the financial year ending on 30/06/2023, Breve Ltd purchased inventory from Minim Ltd for $1,872,000. This inventory had previously cost
Minim Ltd $748,000. By 30/06/2023, 55% of this inventory was sold to outsiders by Breve Ltd.
Cost
Sold of
$748,000 ########
(f) Minim Ltd borrowed a loan from Breve Ltd amounting to $617,000 at the start of the current period. On 30/06/2023, Minim Ltd paid the annual
interest for the intra group loan at a rate of 8.50%.
Loan
(g) During the current year, Breve Ltd paid Arina Ltd, an external party for management fees expense amouning to $2,000
Mgt fees expense
$617,000
(i) The tax rate is:
30%
Requirements:
(i) Prepare the acquisition analysis at the date of acquisition.
(Complete your answers in Sheet 2: Acquisition Analysis)
(5 marks)
(ii) Record the consolidated journal entries necessary to prepare consolidated accounts for the year ending 30/06/2023 for the group comprising Breve
Ltd and Minim Ltd.
(Complete your answers in Sheet 3: Consolidated Journal Entries)
(iii) Complete the consolidated worksheet for the year ending
(20 marks)
– Entering the consolidated journal entries in Part (ii) above to the appropriate debit and credit columns in the Consolidated Worksheet; and
– Clearly labelling the references for each of the adjustments in the Consolidated Worksheet; and
– Completing the Group figures in the Consolidated Worksheet.
(20 marks)
(Complete your answers in Sheet 4: Consolidated Worksheet)
Part B – Discussion Question on Control
Horizon Ltd holds 30% of the voting shares of Southland Ltd. The balance of the voting shares (70%) are held by Locky Ltd. Horizon Ltd also holds
debt instruments in Southland Ltd that are convertible into voting shares of Southland Ltd at a fixed price that is ‘deeply in the money’. If the debt
was converted, Horizon Ltd would hold 55% of the shares of Southland Ltd.
Required:
IFRS 10 / AASB 10 Consolidated Financial Statements focuses on control as the key concept underlying the parent/subsidiary relationship, explain the
circumstances in which an investor controls an investee according to IFRS 10 / AASB 10. Now, consider the case of Southland Ltd, explain whether
either Horizon Ltd or Locky Ltd should consolidate Southland Ltd in accordance with IFRS 10 / AASB 10.
(Complete your answers in Sheet 5: Discussion Question)
(5 marks)
5
Dep Rate R.V.
10%
$432,000
Sold outside
55%
I/R
8.50%
$2,000
$0
Acquisition Analysis
Group of Minim Ltd and Minim Ltd
Consideration transferred
FVINA acquired
BVINA
FV Adjustments
FVINA acquired
Goodwill
Note: Select whether there is a goodwill or a gain on bargain purchase
2. Consolidation Adjustments at 30/06/2023
Ref. Accounts
(a) FV adjustments
(b) Pre-acquisition elimination entries
Dr
Cr
(c) Intra-group transaction – Current period transfer of inventory
(d) Intra-group transaction – Prior period transfer of inventory
(e) Intra-group transaction – Transfer of NCA in prior period
(f)
Other consolidation entries, if any
Please change the title of the transactions, as well as assigning a reference number to each of the new consolidated entry.
Note 1: The number of rows is not an indication of how long the answer is.
Note 2: The column for “Ref” is used for posting to the consolidated worksheet. You can use (a), (b), (c),etc.
Note 3: Add additional consolidated entries if needed. Put them separately under “Other consolidated entries”
Consolidated Worksheet – Group of Minim Ltd and Minim Ltd
For the year ending 30/06/2023
Breve Ltd
Consolidated Entries
Minim Ltd
Ref
Sales
less Cost of Goods Sold
$6,586,000.00
$3,951,600.00
$3,318,600.00
$2,157,000.00
$329,300.00
$263,400.00
$598,700.00
$165,900.00
$52,445.00
$153,155.00
Other Income
plus Interest revenue
Dividend revenue
$78,600.00
$360,100.00
$0.00
$0.00
less Income tax expense
$564,500.00
$237,000.00
Net Profit
$1,317,200.00
$553,100.00
Retained earnings (01/07/2022)
$1,975,600.00
$578,700.00
Available for appropriation
$3,292,800.00
$1,131,800.00
Interim dividend paid
Final dividend declared
Retained earnings (30/06/2023)
$308,700.00
$514,500.00
$2,469,600.00
$154,300.00
$205,800.00
$771,700.00
Retained earnings (30/06/2023)
Share capital
General Reserve
BCVR / Revaluation Reserve
Total Owner’s Equity
$2,469,600.00
$5,350,800.00
$411,600.00
$0.00
$8,232,000.00
$771,700.00
$1,852,200.00
$463,100.00
$0.00
$3,087,000.00
Loan payable (due 30/06/2025)
Dividend payable
Deferred Tax Liability
Other liabilities
Total Liabilities
$0.00
$514,500.00
$617,400.00
$926,100.00
$2,058,000.00
$617,000.00
$205,800.00
$51,400.00
$154,800.00
$1,029,000.00
Total Liabilities & Owner’s Equity
$10,290,000.00
$4,116,000.00
Assets
Dividend receivables
Inventory
Property, Plant & Equipment
$205,800.00
$1,440,600.00
$2,778,300.00
$0.00
$246,900.00
$1,646,400.00
Accumulated depreciation
-$1,111,400.00
-$329,300.00
Land
Investment in Minim Ltd
Loan receivable
Goodwill
Accumulated Impairment Loss
Deferred Tax Asset
$1,749,300.00
$4,116,000.00
$617,000.00
$0.00
$0.00
$0.00
$1,646,400.00
$0.00
$0.00
$0.00
$0.00
$0.00
Other assets
Total Assets
$494,400.00
$10,290,000.00
$905,600.00
$4,116,000.00
Depreciation expenses
Interest expenses
Other expenses
Dr
Cr
Group
Ref
Part B – Discussion Question on Control
Horizon Ltd holds 30% of the voting shares of Southland Ltd. The balance of the voting
shares (70%) are held by Locky Ltd. Horizon Ltd also holds debt instruments in Southland
Ltd that are convertible into voting shares of Southland Ltd at a fixed price that is ‘deeply
in the money’. If the debt was converted, Horizon Ltd would hold 55% of the shares of
Southland Ltd.
Required:
Answer here
3 key elements of Control: