University : Laureate International University UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : ACCT6005
Country : Australia
Assignment Task:

Learning Outcomes

 This assessment addresses the following subject learning outcomes: 

a) Prepare consolidated financial statements and related accounting entries for incorporated entities. 

d) Generate and communicate strategic recommendations in various inter-entity relationship scenarios with reference to relevant accounting standards.

 

Context: 

• Assessment coverage: Module 4 Associates and Joint Ventures 

• You are required to demonstrate: 1) the assumed knowledge and skills from Module 1 Introduction and Principles of Consolidation, Module 2 Intragroup Transactions, and Module 3 Non-controlling Interest, 2) understanding and ability to account for associates and joint ventures using the equity method of accounting. 

• You are able to prepare: acquisition analysis, adjustment entries for associates and joint ventures using the equity method of accounting, consolidated financial statements 

• You are able to recommend and communicate strategic recommendations regarding associates and joint ventures.

Case Scenario 

Antara Ltd operates in the construction industry and do not prepare consolidated financial statements. Laura Jones is the senior accountant of the company, leading the financial reporting team. As a result of being profitable for the last five years, on 1 July 2018, Antara Ltd acquired 25% of the issued ordinary shares of Blanca Ltd paying $198 000 in cash. This provided Antara Ltd with the significant influence over Blanca Ltd. 

At the acquisition date, Laura and her team received the information below for Blanca Ltd: 

• Equity comprised $180 000 share capital and $144 000 retained earnings. 

• All identifiable assets and liabilities were recorded at their carrying amounts equal to the fair values with the exceptions of three assets: Inventory, Land, and Equipment. 

$ $ Inventory 126 000 153 000 Land 162 000 198 000 Equipment 414 000 432 000 

Other information related to the above assets includes: 

• Blanca Ltd sold all the inventory by 30 June 2020. 

• After acquisition, Land was revalued by Blanca Ltd and revaluation was recognised in Blanca Ltd’s own accounting book. The company uses the revaluation model to account for its non-current assets. At 30 June 2019, Blanca Ltd had Land recorded at $252 000 fair value, and at 30 June 2020 at $288 000 fair value. 

• Blanca Ltd planned to use Equipment for another 5 years, using the straight line method of depreciation. 

During two financial years following the acquisition, Antara Ltd and Blanca Ltd carried out the inter-entity transactions below. 

• Antara Ltd sold a machine to Blanca Ltd for $85 000. The machine had a carrying amount of $79 600 at the time of sale on 1 January 2019. Blanca Ltd planned to use the machine for a further 3-year with depreciation based on the straight line method. 

• On 15 May 2019, Antara Ltd sold inventory to Blanca Ltd for $20 800. The inventory had cost Antara Ltd $10 000. Blanca Ltd sold half of the inventory externally by 30 June 2019. 

• On 30 April 2020, Antara Ltd sold inventory to Blanca Ltd for $126 000. The profit before-tax of this transaction was $14 400. Blanca Ltd sold 90% of the inventory externally by 30 June 2020.

 

Part A Practical Problem Solving (40 Marks) 

a) Prepare the journal entries for Antara Ltd at 30 June 2020 to account for its investment in Blanca Ltd, assuming Antara Ltd prepares consolidated financial statements. 

b) Prepare the consolidated statement of profit or loss and other comprehensive income for Antara Ltd for the year ended at 30 June 2020, assuming this statement includes Blanca Ltd’s financial results. (15 marks) 

Part B Recommendations (60 Marks) 

Prepare a report explaining and making recommendations on the financial reporting issues below. 

a) The impact of change to preparing consolidated financial statements on Antara Ltd’s disclosure of financial information. (40 marks) 

Your response should include: 

• The differences between applying the equity method of accounting in Antara Ltd’s own accounting records, and applying the equity method of accounting in Antara Ltd’s consolidation worksheet. 

• The content of Antara Ltd’s relevant financial statement. 

• The extent of financial information available to Antara Ltd’s external users. 

• References to the financial information in Part A and relevant accounting standards. 

b) Potential dividends paid by Blanca Ltd. This is because Blanca Ltd has been profitable and the company management plans to pay dividends to Antara Ltd. 

 

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  • Posted on : July 25th, 2018
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