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Corporate Accounting Systems
Consolidated Financial Statements with Non-Controlling Interests
INSTRUCTIONS
1. The assignment is to be prepared using Excel spreadsheet
2. The assignment marking guidecan be found as the last pages of this document.Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well have met the expected standards (performance levels) for the criteria identified.
3. Marks will be deducted for poor quality presentation, for incorrect work, and for missing work.
QUESTION
Using the information below and on the next two pages, prepare the following as at 30th June 2014:
PART A: Adjustment/elimination journal entries for consolidation at that date; and
PART B: Detailed calculation of non-controlling interest balance and consolidation worksheet; and
PART C: Consolidated financial statements and statements of changes in equity for the group and parent.
INFORMATION
For the year ended 30 June 2012:
1. On 1 July 2011 Harbour Ltd created a group entity when it purchased 80% of the issued capital of Bridge Ltd for $440,000 cash. On acquisition Bridge Ltds accounts showed: Share capital $300,000 and Retained earnings $125,000. All assets and liabilities appearing in Bridge Ltds financial statements were fairly valued, except:
· An item of Bridge Ltds plant, that had originally cost $157,000 and had a carrying value of $100,480, was undervalued by $30,000. The plant was still on hand at 30 June 2014.
· Bridge Ltd had an internally developed identifiable intangible asset, a patent, with a fair value of $35,000.
During the year Bridge Ltd made sales of inventory to Harbour Ltd of $70,200. Harbour Ltds closing inventories on 30 June 2012 included $33,600 bought from Bridge Ltd (which included the intragroup mark-up on original cost price).
For the year ended 30 June 2013:
2. On 1 January 2013 it was decided that goodwill acquired in Bridge Ltd should be marked down at a rate of 10% per annum from this date forward (% based on the original value you calculated at acquisition).
3. Also on 1 January 2013 Harbour Ltd sold plant to Bridge Ltd for $35,000. This was financed by a short-term interest-free loan from Harbour Ltd. The plant had originally cost $82,000 when purchased on 1 January 2010.
Harbour Ltd declared and paid dividends of $50,000 for the year. Bridge Ltd did not declare or pay any dividends for the year.
For the year ended 30 June 2014:
4. During the year Bridge Ltd made sales of inventory to Harbour Ltd of $88,100.
5. Harbour Ltdsinventories included the following amounts bought from Bridge Ltd (which included the intragroup mark-up on original cost price): Closing inventory on 30 June 2014 was $13,300; and Opening inventory on 1 July 2013 was $9,100.
6. Harbour Ltd charged management fees to Bridge Ltd.
7. Dividends were declared/paid by both companies.
8. Non-controlling interests to be recognized.
ADDITIONAL INFORMATION:
· The company tax rate is currently 30% and it has been this rate for many years.
· Harbour has the following accounting policies for the group:
(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary;
(ii) Non-controlling interests are measured at the proportionate share of a subsidiarys identifiable net assets;
(iii) Intragroup sales of inventory to be at a markup of 40% on cost;
(iv) Plant is depreciated using the diminishing value method at a rate of 20% p.a. (also known as the declining-balance or diminishing-balance method); and
(v) All calculated amounts to be rounded to the nearest whole dollar.
NOTE:
· You MUST number your journal entries as they relate to the point numbers for each event as given in the information. Where more than one journal is needed for an event to be completely accounted for add the letters a,b,c, etc to them as necessary. [For example, if three separate journal entries are required to fully record the information detailed in point number 1, then the first journal will be 1a and the second is to be 1b and the third 1c.] Short narrations are expected for each journal entry. Marks will be lost if journals are not presented in a clear and professional manner (i.e. poor or unclear presentation can include showing the debit entry on one page but the credit entry on another, or not clearly distinguishing between debit and credit entries).
· The required statements for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Notes to the statements are not required. Marks will be lost if statements are not presented in a clear and professional manner (i.e. poor or unclear presentation can include splitting the reports over two pages, so start each statement on a new page!).
· You may cut and paste the financial information on the next page into your excel file, but no other information is to be copied into your file from anywhere else.
· You are expected to use at least the basic formula functions in Excel when preparing worksheets and financial statements (i.e. use Excel formulas to add totals and sub-totals etc, rather than calculating values manually and then just typing them in to the spreadsheet!).
AT 30 JUNE 2014
HARBOUR LTD
BRIDGE LTD
$
$
INCOME STATEMENTS
Sales revenue
1,413,500
978,300
Cost of goods sold
798,000
508,300
Gross profit
615,500
470,000
Other income
Management fee revenue
22,600
–
Dividend revenue
69,800
–
Expenses
Depreciation expense
(126,200)
(49,000)
Management fee expense
–
(22,600)
Other expenses
(326,100)
(263,800)
Profit before tax
255,600
134,600
Income tax expense
(76,680)
(40,380)
Profit for the year after tax
178,920
94,220
Retained earnings at start of year
59,120
134,320
Dividend paid/declared
(150,000)
(86,000)
Retained earnings at year end
88,040
142,540
BALANCE SHEETS
Equity
Share capital
850,000
300,000
Retained earnings
88,040
142,540
Current Liabilities
Accounts payable
191,960
115,860
Income tax payable
95,900
66,700
Dividends payable
75,000
50,000
Non-Current Liabilities
Loans
950,000
565,100
Provision for employee benefits
21,900
19,400
Deferred tax liability
6,900
–
2,279,700
1,259,600
Current Assets
Accounts receivable
276,300
104,100
Allowance for doubtful debts
(15,500)
(7,000)
Dividends receivable
40,500
–
Inventory
112,100
144,200
Non-Current Assets
Land and buildings
800,000
610,800
Plant at cost
901,200
601,200
Accumulated depreciation plant
(294,900)
(194,400)
Deferred tax asset
–
700
Shares in Opera House Ltd
20,000
–
Investment in Bridge Ltd
440,000
–
2,279,700
1,259,600
200109 CORPORATE ACCOUNTING SYSTEMS ASSIGNMENT MARKING CRITERIA & STANDARDS AUTUMN 2014
CRITERIA
UNSATISFACTORY
BELOW EXPECTATIONS
MEETS MINIMUM EXPECTATIONS FOR A PASS
EXCEEDS MINIMUM EXPECTATIONS
SIGNIFICANTLY EXCEEDS EXPECTATIONS
A. Journal entries:
Correctness and
Completeness
of journals
Four+ events not correctly recorded and/or missing and/or included incorrectly
? 0 marks
Three events not correctly recorded and/or missing and/or included incorrectly
? 3 marks
Two events not correctly recorded and/or missing and/or included incorrectly
? 5 marks
One event not correctly recorded and/or missing and/or included incorrectly
? 7 marks
Every required journal is correct, with none missing or included incorrectly
? 9 marks
Presentation
Numbering
Narrations
of journals
Three or more journals are not presented clearly and/or not complete and/or not numbered correctly
? 0 marks
One or two journals not presented clearly and/or not complete and/or not numbered correctly
? ½ mark
All journals are presented clearly and numbered correctly. All narrations are complete and informative
? 1 mark
B. Consolidation Worksheet and Non-Controlling Interest Calculation:
Non-Controlling Interest Calculation
Four+ errors and/or total does not agree to the Balance Sheet
? 0 marks
Three errors but total agrees to the Balance Sheet
? ½ mark
Two errors but total agrees to the Balance Sheet
? 1½ marks
One error but total agrees to the Balance Sheet
? 2½ marks
Presented well, no errors and agrees to the Balance Sheet
? 3 marks
Consolidation Worksheet
Poor presentation and/or not balanced due to errors and/or missing entries
? 0 marks
Not clearly presented but does balance.
? 1 mark
Clearly presented. No errors and/or missing entries
? 2 marks
C. Consolidated Financial Statements
Presentation of Comprehensive Income Statements & Balance Sheets
(for both Group and Parent)
Poor presentation and/or more than three errors and/or missing headings or amounts
? 0 marks
Not acceptably presented and/or three errors and/or missing headings or amounts
? ½ mark
Acceptably presented, but with two errors and/or missing headings or amounts
? 1½ marks
Acceptably presented, but with one error and/or missing heading or amount
? 2 marks
Correctly presented. No errors and/or missing headings or amounts
? 3 marks
Statements of Changes in Equity
(for both Group and Parent)
One or more errors and/or does not agree to the Balance Sheet
? 0 marks
Could be presented more clearly but agrees to the Balance Sheet
? 1½ marks
Clearly presented and agrees to the Balance Sheet
? 2 marks
Deductions: 1. Late submission of printed or electronic version ? -10% per day 2. Electronic version not same as printed version ? -50%
STUDENT ID: STUDENT NAME: FINAL MARK: / 20
[NOTE: Errors flowing from earlier incorrect journals, etc will not be treated as further errors]