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HA2032 CORPORATE ACCOUNTING ASSIGNMENT 2
General Instructions:
This is a group assignment whose members should not exceed three (3). It is required to be submitted in both soft and hard-copy by the Friday of Week 9. Total marks applied to this assessment are 20%.
Please ensure that you attach an assignment submission sheet to your hard copy only. Late submissions draw a penalty of 5% per day of the value of the assessment (1 mark in this case) up to a maximum of fourteen (14) days. After that date, your assessment will not be accepted unless prior and special consideration has been granted.
This is NOT a report but it is expected that your submission will be in an appropriate format. There is no word limit applied but you should ensure that each question is appropriately answered. Where references are used, ensure they are recognised (refer to student handbook or your lecturer if unsure).
Part A and B are questions from our reference material entitled Company Accounting 5th edition by Peter Jubb, Stephen Haswell and Ian Langfield-Smith.
Objectives:
1) Demonstrate an ability to provide eliminating as well as adjusting entries in the preparation of consolidated worksheets.
2) Understand the difference between pre-control and post-control transactions.
3) Evaluate the importance of AASB 127 Consolidated and Separate Financial Statements and AASB 101 Presentation of Financial Statements.
Part A
Chapter 19 Investing in Related Entities (Q19.6 p. 620) (2 marks)
Compare the accounting treatment of dividends appropriated from pre-control and post control equities of a subsidiary. Consider the accounting by the companies paying and receiving the dividend, as well as by the corporate group.
Part B
Chapter 20 Intra-group Transactions (Q20.6 p. 666) (3 marks)
In response to a question in an exam, a student stated: Under AASB 101 there is a general prohibition against the offsetting of revenues and expenses and of assets and liabilities, yet under AASB 127 we offset assets and liabilities and revenues and expenses when eliminating the impact of intra-group transactions. How can the treatment required by AASB
127 be right? Explain why the treatment in AASB 127 is consistent with the treatment required by AASB 101.
HA2032 Corporate Accounting Assignment 2 Term 3 12
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Part C
Chapter 18 Acquisition Method Introduction & Substitution (15 marks)
As part of the diversification program, the Board of Directors of Budget Airlines Ltd decided to buy all the shares of Food Ltd, a catering business, located in Australia. The purchase took place on 31 December 20×2, and the price of $40,000 is based on the fair value of Foods assets at that date. The fair values differ from Foods carrying amounts shown in the worksheet for two reasons. First, Foods most recent financial statements are dated 30 November. Foods estimated results for the month of December are:
$
Profit for the month
200
Movements on net assets:
Inventory increase
400
Accounts receivable decrease
200
Equipment decrease (due to
500
depreciation)
Employee benefits provision increase
500
Accounts payable increase
200
Other assets increase
1200
Second, the following items are not at fair value in Foods financial statements. Carrying amounts shown include adjustments made for Foods estimated results for December:
Carrying
Fair
Amount
Value
$
$
Inventory
8000
7000
Patent
not recorded
6000
Equipment
5000
7000
Employee benefits provision
5500
7000
Property
12000
16000
Other information:
a) Food Ltd has not yet adjusted its financial statements to include missing transactions.
b) Food Ltd will be prevented by accounting standards from recognising an intangible asset.
c) Food Ltd applies the cost model to its equipment asset and a switch to the revaluation model is not appropriate in its circumstances. The Budget Airlines group usually applies the revaluation model under AASB 116, but other group members do not have any equipment of the type used by Food.
d) The employee benefits provision is based on the estimate of Bendzulla Actuarial Pty Ltd which will be taken up as an adjustment.
e) Food applies the revaluation model to property, but as at the control date it had not made a recent appraisal of the propertys fair value.
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Required:
a) Prepare the worksheet.
b) Prepare consolidation journal entries in correct form.
Consolidation Worksheet
at 31 December 20X2: Balance sheet
Qantas
Food
Adjustments
Sum
Group
Eliminations
Dr
Cr
Dr
Cr
Paid-up capital
20000
15000
Other reserves
10000
5000
FV reserve
Retained profits
15000
4000
Owners equity
45000
24000
Accounts payable
5000
3000
Employee benefits provision
2000
Accumulated depreciation Equipment
5000
Total equities and asset contras
50000
34000
Accounts receivable
3000
1000
Inventory
4000
7000
Equipment
9000
Identifiable intangible Patent
Investment in subsidiary
40000
Property
2000
12000
Consolidation goodwill
Other assets
1000
5000
Total assets
50000
34000
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