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Assignment Task :

Question 1
On 1 July 2018, Parent Ltd acquired all the issued shares of Subsidiary Ltd for $20000 cash and issued #50000 ordinary shares in Parent Ltd at $5 each. At this date the equity of Sub Ltd consisted of share capital of $140 000, general reserve of $24 000 and retained earnings of $42 000. At the time of acquisition, there was cum dividend declared by Sub Ltd of $5,000 and recorded goodwill of $7,000.
All the identifiable assets and liabilities of Sub Ltd were recorded at amounts equal to fair value except for:
Plant and equipment: $100,000 (carrying amount, cost was $115,000), Fair value 180,000 remaining life 4 years; and was depreciated on a straight-line basis.
Inventory: $41,000 (carrying amount), Fair value $50,000
Contingent liabilities for lawsuit, Fair value $60,000

Additional information
All inventories were sold by 30 June 2019. Lawsuit settled and paid $50,000 by 30 June 2019.
In June 2019, Parent Ltd conducted an impairment test on the patent, as it was considered to have an indefinite life, and the goodwill. As a result, the goodwill was considered to be impaired by $2,000.
The tax rate is 30%.

Required
Prepare acquisition analysis and consolidation worksheet entries for the Parent Ltd on 30 June 2019.

Question 2
On 1 July 2019, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd paid $30 000 in cash and 20 000 shares in Fluffy Ltd valued at $3 per share. At this date, the equity of Glider Ltd consisted of $66 000 share capital and $6000 retained earnings also there was ex-dividend payable of $5,700.
At 1 July 2019, all the identifiable assets and liabilities of Glider Ltd were recorded at amounts equal to their fair values except for Land (carrying amount $47000, fair value $59000). In addition, Glider Ltd also had reported a contingent liability at 30 June 2019 in relation to claims by customers for damaged  goods. Fluffy Ltd placed a fair value of $3000 on these claims. However, Glider Ltd settled the claims making payments of $13,000 during June 2020.

Additional information
(a) During the 2019–20, Fluffy Ltd sold inventory to Glider Ltd for $21 000. None of this was on hand at 30 June 2020.
(b) During the 2019–20, Glider Ltd sold goods to Fluffy Ltd for $4500. Original cost of the inventory was $2,000. At 30 June 2020, all inventories were held by Fluffy Ltd.
(c) On 1 July 2019, Glider Ltd sold an item of plant to Fluffy Ltd for $15000. This plant had a carrying amount in the records of Glider Ltd of $14000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.
(d) On 1 January 2020, Fluffy Ltd sold an item of inventory to Glider Ltd for $18000. The inventory had cost Fluffy Ltd $16 000. This item was classified by Glider Ltd as plant. Plant of this type is depreciated by Glider Ltd at 20% p.a.
(e) On 1 March 2020, Glider Ltd sold an item of plant to Fluffy Ltd. Whereas Glider Ltd classified this as plant, Fluffy Ltd classified it as inventory. The sales price was $9000 which included a profit to Glider Ltd of $1500. Fluffy Ltd sold this to another entity on 31 March for $9900.
(f) Glider Ltd has declared dividends in May 2020, which remained unpaid by 30 June 2020.
(g) In March 2020, Fluffy Ltd sold inventories to Glider Ltd on credit for $5000. These inventories were purchased by Fluffy Ltd for a cost of 1000. Half of the inventory was sold to Golden Ltd for $8000 by 30 June 2020. 80% of the credit sales to Glider Ltd remained unpaid.
The tax rate is 30%.

Required
Prepare consolidation worksheet entries for Fluffy Ltd at 30 June 2020.

Question 3
On 1 July 2017, Investor Ltd acquired 20% of Associate Ltd voting shares and obtained significant
influence over Associate Ltd. The following transactions occurred during the year ended 30 June 2020:
• Associate Ltd paid dividends of $10,000.
• Associate Ltd’s profit after tax was $5,000.
• Investor Ltd sold inventory to Associate Ltd for $500,000 and it had originally cost Investor Ltd $250,000. 5% of the inventory remains on hand at year end.
• Associate Ltd recognised in its financial statements a revaluation increment of $60,000 on its investments in land.


 

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