Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: THEend8_
Individual Assignment
Assessment Guide
ACC-ACF2100
Objective
The objective of this individual assignment is to advance your understanding of learning
objectives in Topic 7-Topic 9. The assignment also aims to sharpen your accounting expertise
and gives you an absolute advantage in your future job market.
Introduction
In the future, many of you will work in public listed companies with several subsidiaries under
control. For example, Woolworths wholly owns three subsidiaries (all incorporated in New
Zealand), and Coles wholly owns more than 40 subsidiaries (with three subsidiaries
incorporated outside of Australia). Both Woolworths and Coles need to prepare consolidated
financial statements for the group and make the consolidated financial statements publicly
available. Many of you will also work in international Big-4 accounting firms and will audit
consolidated financial statements of groups. For example, Deloitte audits the consolidated
financial statements of Woolworths Group, and Ernst & Young audits the consolidated
financial statements of Coles Group. Given these, it is crucial to understand how consolidation
works and how to prepare consolidated financial statements.
In this individual assignment, you will work on a consolidation question, which requires you
to integrate the knowledge that you have learned from Topic 7 to Topic 9. The consolidation
question is based on a setting where a parent wholly owns a subsidiary. The consolidation
question consists of four (4) parts. Part A asks you to prepare an acquisition analysis on the
acquisition date. Part B asks you to prepare consolidation worksheet entries on the acquisition
date. Part C asks you to prepare consolidation worksheet entries subsequent to the acquisition
date. Part D asks you to state your understanding of how the consolidation process works. The
consolidation question is provided in the following pages.
Marking
Task Marking
Part A 10
Part B 10
Part C 37
Part D 3
Total marks 60
Weight 15%
Coverage
Topic 7
LO8 Explain how a consolidation worksheet is used
LO9 Prepare an acquisition analysis for the parent’s acquisition in a subsidiary
LO10 Prepare the worksheet entries at the acquisition date, being the business
combination valuation entries and the pre-acquisition entries
Topic 8
LO1 Prepare the worksheet entries in periods subsequent to the acquisition date
Topic 9
LO2 Prepare worksheet entries for intragroup transactions involving the sale of
inventories including adjustments for unrealised profits or losses in beginning and
ending inventories
LO3 Prepare worksheet entries for intragroup transactions involving the transfer of
property, plant and equipment in the current period or a prior period including
adjustments for gains or losses and excess depreciation or under-depreciation
LO4 Prepare worksheet entries for intragroup transactions involving transfers from
inventories to property, plant and equipment and from property, plant and
equipment to inventories
Instructions
Parts Details
Part A Please follow the acquisition analysis format and detail your calculations for
each step in the acquisition analysis.
Part B The worksheet entries on the acquisition date should include BCVR entries for
fair value adjustments and goodwill recognision and pre-acquisition entries.
Part C The worksheet entries subsequent to the acquisition date should include BCVR
entries, pre-acquisition entries, and the elimination of intragroup transaction
entries.
There are two methods to record the sale of PPE:
Method 1: Method 2:
It is the second method that the parent and the subsidiary use to record the sale
of PPE. The proceeds on sale of PPE is an income account and the carrying
amount of PPE sold is an expense account.
Part D Discuss how to derive a consolidated amount of sales revenue based on the
information provided in the question and the worksheet entries you make.
Submission
Submission Details
Submission deadline Friday 27 May 16pm
Submission document A Pdf document containing all the required parts of the
assignment
Submission location Submit to Moodle under the “individual assignment”
folder. The submission link will be available at least two
days before the submission due date.
Special consideration
Individual Assignment
On 1 July 2018, Priscilla Ltd acquired all the issued shares of Lisa Marie Ltd. The consideration
for the acquisition was $30 000 in cash and 20 000 shares in Priscilla Ltd, valued at $3 per
share. At this date, the equity of Lisa Marie Ltd consisted of $66 000 share capital and $6 000
retained earnings.
At 1 July 2018, all the identifiable assets and liabilities of Lisa Marie Ltd were recorded at
amounts equal to their fair values except for:
Carrying amount Fair value
Plant (cost $150 000) $ 120 000 $ 123 000
Patents 90 000 105 000
Inventories 18 000 22 500
The plant was considered to have a further 5-year life. The patents were sold for $120 000 to
an external entity on 18 August 2018. The inventories were all sold to external entities by 30
June 2019.
Additional information
(a) Priscilla Ltd sells certain raw materials to Lisa Marie Ltd to be used in its manufacturing
process. At 1 July 2021, Lisa Marie Ltd held inventories sold to it by Priscilla Ltd in the
previous year at a profit before tax of $600. During the 2021–22 year, Priscilla Ltd sold
inventories to Lisa Marie Ltd for $21 000. None of the inventories are on hand at 30 June 2022.
(b) Lisa Marie Ltd also sells items of inventories to Priscilla Ltd. During the 2021–22 year,
Lisa Marie Ltd sold goods to Priscilla Ltd for $4500. At 30 June 2022, inventories which had
been sold to Priscilla Ltd at a profit before tax of $300 are still on hand in Priscilla Ltd’s
inventories.
(c) On 1 July 2021, Lisa Marie Ltd sold an item of plant to Priscilla Ltd for $15 000 that had
cost Lisa Marie Ltd $14 000 on the same date. This plant is depreciated at 10% p.a..
(d) On 1 January 2021, Priscilla Ltd sold inventories to Lisa Marie Ltd for $18 000. The
inventories had cost Priscilla Ltd $16 000. This item was classified by Lisa Marie Ltd as plant
and depreciated at 20% p.a.
(e) On 1 March 2022, Lisa Marie Ltd sold an item of plant to Priscilla Ltd. Whereas Lisa Marie
Ltd classified this as plant, Priscilla Ltd classified it as inventories. The sales price was $9000,
which included a profit before tax to Lisa Marie Ltd of $1500. Priscilla Ltd sold this asset to
an external entity on 31 March 2022 for $9 900.
(f) The tax rate is 30%.
The following financial information was provided by the two companies for 30 June 2022:
Priscilla Ltd Lisa Marie Ltd
Dr Cr Dr Cr
Sales revenue 64 500 78 000
Cost of sales 30 900 46 350
Trading expenses 4 800 9 000
Office expenses 7 950 4 050
Depreciation expenses 1 800 3 900
Proceeds on sale of plant 9 000 15 000
Carrying amount of plant sold 7 500 14 000
Income tax expense 11 100 7 300
Share capital 96 000 66 000
Retained earnings (1/7/21) 48 000 31 500
Current liabilities 21 100 10 500
Deferred tax liability 11 000 15 000
Plant 57 000 107 250
Accumulated depreciation - plant 18 300 33 450
Intangibles 12 000 11 100
Deferred tax assets 8 100 9 450
Shares in Lisa Marie Ltd 90 000 0
Inventories 28 500 24 600
Receivables 8 250 12 450
267 900 267 900 249 450 249 450
Required:
Part A: Prepare acquisition analysis at 1 July 2018.
Part B: Prepare consolidation worksheet entries at 1 July 2018.
Part C: Prepare consolidation worksheet entries at 30 June 2022.
Part D: Use the example of the sales revenue account to discuss how to derive the consolidated
amount of sales revenue in the consolidated statement of profit or loss.