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.