ORE LTD – PIRIN LTD
Ore
Ltd Pirin
Ltd Adjustments Group
Dr Cr
Profit before tax 3 200 1 800 1
1 2 000
200 2 800
Income tax expense 1 300 240 600
60 1
1 880
Profit 1 900 1 560 1 920
Retained earnings (1/7/11) 1 500 2 100 1
2 200
1 400 60 1 2 060
3 400 3 600 3 980
Transfer from BCVR – – 2 1 400 1 400 1 –
Dividend paid 500 0 500
Retained earnings (30/6/12) 2 900 3 660 3 480
Share capital 25 000 10 000 2 10 000 25 000
General reserve 8 000 3 000 2 1 500 9 500
Business combination valuation reserve – – 2 700 700 1 –
35 900 16 660 37 980
Other components 1 500 300 1 800
Increases/Decreases (500) 200 (300)
1 000 500 1 500
36 900 17 160 39 480
Liabilities 5 000 1 300 1 120 300 1 6 480
41 900 18 460 45 960
Inventory 3 000 4 000 7 000
Cash 300 360 660
Financial assets 3 000 2 000 5 000
Shares in Pirin Ltd 15 000 – 15 000 2 –
Land 8 600 5 100 13 700
Plant 17 000 8 000 1 500 25 500
Accum depreciation (5 000) (1 000) 1 500 400 1 (5 900)
41 900 18 460 18 720 18 720 45 960
ORE LTD
Consolidated Statement of Comprehensive Income
for financial year ended 30 June 2012
Profit before income tax $2 800
Income tax expense 880
Profit for the period $1 920
Other components of equity: decrements (300)
Comprehensive income for the period $1 620
ORE LTD
Consolidated Statement of Changes in Equity
for financial year ended 30 June 2012
Comprehensive income for the period $1 620
Retained earnings balance at 1 July 2011 $2 060
Profit for the period 1 920
Dividend paid (500)
Retained earnings balance at 30 June 2012 $3 480
Share capital balance at 1 July 2011 $25 000
Share capital balance at 30 June 2012 $25 000
General reserve balance at 1 July 2011 $9 500
General reserve balance at 30 June 2012 $9 500
Other components of equity at 1 July 2011 $1 800
Decreases (300)
Other components of equity at 30 June 2012 $900
Problem 22.3 (cont’d)
ORE LTD
Consolidated Statement of Financial Position
as at 30 June 2012
Current Assets
Inventories $7 000
Financial assets 5 000
Cash 660
Total Current Assets 12 660
Non-current Assets
Property, plant and equipment:
Land 13 700
Plant 25 500
Accumulated depreciation – Plant (5 900)
Total Non-current Assets 33 300
Total Assets $45 960
Equity
Share capital $25 000
Reserves: General reserve 9 500
Other components of equity 1 500
Retained earnings 3 480
Total Equity 39 480
Liabilities 6 480
Total Equity and Liabilities $45 960
Problem 22.4 Cons. worksheet, unrecognised intangibles &liabilities
LYNGEN LTD – RILA LTD
Lyngen
Ltd Rila
Ltd Adjustments Group
Dr Cr
Profit before tax 50 000 15 000 1
1
1 300
1 500
1 000 5 000 1 67 200
Tax expense 20 000 6 000 1 1 500 300
540 1
1 26 660
Profit 30 000 9 000 40 540
Retained earnings (1/7/12) 37 000 45 000 1
1
2 840
2 000
44 800 600
1
34 960
Transfer from BCVR – – 1
2 3 500
2 100 2 100
3 500 1
2 –
67 000 54 000 75 500
Dividend paid 20 000 20 000
T’fer to gen reserve – 20 000 20 000 2 –
20 000 20 000 20 000
Ret earn. (30/6/13) 47 000 34 000 55 500
Share capital 150 000 100 000 2 100 000 150 000
General reserve 12 000 20 000 2 20 000 12 000
Business comb.
valuation reserve – – 2
2 15 200
3 500 4 200
12 400
2 100 1
1
2 –
209 000 154 000 217 500
ARR (1/7/12) 14 000 0 14 000
Increment 6 000 0 6 000
ARR (30/6/13) 20 000 0 20 000
Other components (1/7/12) 14 000 14 000 28 000
Losses (4 000) (10 000 (14 000)
Other com (30/6/13) 10 000 4 000 14 000
239 000 158 000 251 500
Payables 19 000 8 000 27 000
Loan 25 000 0 25 000
Defer. tax liability – – 1 900 1 800 1 900
283 000 166 000 304 400
Shares in Rila 160 000 0 2 10 000 160 000 2 0
Cash 5 000 14 000 19 000
Financial assets 10 000 5 000 15 000
Inventory 30 000 21 000 51 000
Plant & equipment 140 000 163 000 303 000
Accum depreciation (62 000) (37 000) (99 000)
Goodwill – – 1 12 400 12 400
Patent – – 1 6 000 6 000
Accum amortisation – – 3 000 1 (3 000)
283 000 156 000 213 140 213 140 304 400
Problem 22.4 (cont’d)
RILA LTD
Consolidated Statement of Comprehensive Income
for year ended 30 June 2013
Profit before income tax $67 200
Income tax expense 26 660
Profit for the period $40 540
Other components of equity: decrements in financial assets (14 000)
Asset revaluation reserve: increments 6 000
Comprehensive income for the period $32 540
RILA LTD
Consolidated Statement of Changes in Equity
for year ended 30 June 2013
Comprehensive income for the period $32 540
Retained earnings balance at 1 July 2012 $34 960
Profit for the period 40 540
Dividend paid (20 000)
Retained earnings balance at 30 June 2013 $55 500
Share capital balance at 1 July 2012 $150 000
Share capital balance at 30 June 2013 $150 000
General reserve balance at 1 July 2012 $42 000
General reserve balance at 30 June 2013 $42 000
Asset revaluation reserve at 1 July 2012 $14 000
Increments 6 000
Asset revaluation reserve at 30 June 2013 $20 000
Other components of equity at 1 July 2012 $28 000
Available-for-sale financial assets (14 000)
Other components of equity at 30 June 2013 $14 000
Problem 22.4 (cont’d)
RILA LTD
Consolidated Statement of Financial Position
as at 30 June 2013
Current Assets
Cash $19 000
Available-for-sale financial assets 15 000
Inventories 51 000
Total Current Assets 85 000
Non-current Assets
Property, plant, and equipment $303 000
Accumulated depreciation (99 000) 204 000
Goodwill 12 400
Intangibles: Patent 6 000
Accumulated amortisation 3 000 __3 000
Total Non-current Assets 219 400
Total Assets $304 400
Equity
Share capital $150 000
Reserves: General reserve 12 000
Asset revaluation reserve 20 000
Other components of equity 14 000
Retained earnings 55 500
Total Equity 251 500
Current Liabilities
Payables 27 000
Non-current Liabilities
Interest-bearing liabilities: Loan 25 000
Deferred tax liability __900
Total Liabilities 52 900
Total Equity and Liabilities $304 400
On 1 July 2008, Olympus Ltd acquired all the shares of Delphi Ltd. On this date, the equity of Delphi Ltd comprised the following balances:
Share Capital $180 000
General Reserve 20 000
Plant Maintenance Reserve 30 000
Retained Earnings 72 000
At acquisition date, all the identifiable assets and liabilities of Delphi Ltd were recorded at amounts equal to fair value except for:
Carrying Fair
Amount Value
Land $50 000 $75 000
Buildings (cost $75 000) 55 000 57 000
Inventory 45 000 60 000
Plant (cost $260 000) 182 000 190 000
Delivery Truck (cost $90 000) 36 000 38 000
Office Furniture (cost $21 000) 16 500 16 500
At 1 July 2008, Delphi Ltd had recorded goodwill of $12 000 arising from a prior period business combination. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed or lost.
Delphi Ltd registered a patent on 26 June 2008 but did not recognize it as an asset. Olympus Ltd believed the fair value of the patent was $45 000. The patent is legally enforceable for a period of 15 years. On 1 January 2012, Delphi Ltd sold the patent for $30 000.
At 1 July 2008, Delphi Ltd was involved in a lawsuit brought against it by a customer for damages suffered as a result of poor quality goods supplied. Lawyers for Olympus Ltd advised that the court is likely to find in favour of the customer and likely damages may amount to $30 000. After a prolonged court case, damages of $28 000 were paid in full settlement on 3 May 2012.
The plant had a further five year life at acquisition date and was expected to be used evenly over that time. Buildings have a further 10 years of useful life. The delivery truck which was expected to have a further four year useful life at acquisition date was sold on 1 April 2011 for 28 000. During the year ended 30 June 2009 all inventory, on hand at acquisition date, was sold. As a result of the annual impairment test Delphi Ltd wrote its Goodwill down by $5 000 on 30 June 2012.
In the financial year ended 30 June 2011 Delphi Ltd transferred $10 000 from retained earnings on hand at acquisition date to the General Reserve.
Additional information:
(a) On 1 July 2011, Delphi Ltd had on hand inventory worth $36 000, transferred from Olympus Ltd in June 2011. The inventory cost Olympus Ltd $28 000. This entire inventory was sold to external parties in the year ended 30 June 2012.
(b) On 1 April 2009, Olympus Ltd sold inventory which cost $27 000 to Delphi Ltd for $25 000. Delphi Ltd treated this item as plant with a five year useful life.
(c) During the year ended 30 June 2012, Delphi Ltd sold inventory to Olympus Ltd for $54 000 this being at cost plus 20% markup. Of this inventory 80% had been sold to external customers by 30 June 2012.
(d) During the year ended 30 June 2012, Olympus Ltd sold inventory costing $18 000 to Delphi Ltd for $27 000. Two thirds of this inventory was sold to external customers for $21 600.
(e) In May 2010 Olympus Ltd lent $35 000 at an annual interest rate of 4% to Delphi Ltd. Delphi Ltd has as yet made no repayments on the loan.
(f) Olympus Ltd rents surplus space in its warehouse to Delphi Ltd for an annual rental charge of $40 000.
(g) On 1 October 2011 Delphi Ltd sold an item of plant to Olympus Ltd which regarded the item as inventory. The plant had a carrying amount of $11 000 and was sold for $14 000. The item was subsequently sold to an external party in May 2012.
(h) On 1 January 2012 Olympus Ltd sold an item of office furniture to Delphi Ltd for $5 000. The furniture had a carrying amount at the date of sale of $4 500. Both companies depreciate office furniture at 20% per annum.
(i) The gains on Available-for-Sale Financial Assets for the year ended 30 June 2012 were $6 700 (Olympus Ltd) and $1 900 (Delphi Ltd). There were no other movements during the year.
(j) The tax rate is 30%.
On 30 June 2012 the trial balances of Olympus Ltd and Delphi Ltd were as follows:
Olympus Ltd Delphi Ltd
Debit Balances
Cash $90 620 $96 145
Receivables 36 000 83 800
Dividend Receivable 8 000 1 200
Inventory 72 000 97 800
Available-for-Sale Financial Assets 90 250 27 250
Loan Receivable – Delphi Ltd 35 000 –
Shares in Delphi Ltd 360 000 –
Deferred tax assets 32 080 24 725
Land 125 000 50 000
Buildings 120 000 75 000
Plant 450 000 320 000
Delivery Truck 75 000 120 000
Office Furniture 15 000 26 000
Goodwill 28 000 12 000
Cost of Sales 1 440 100 1 196 500
Amortisation and Depreciation 60 000 54 100
Impairment loss – 5 000
CA of non-current assets sold 4 500 11 000
Damages expense – 28 000
Other expenses 63 000 162 400
Income tax expense 68 100 79 860
Dividend paid 12 000 10 000
Dividend declared 6 000 8 000
Transfer to general reserve 10 000 –
3 200 650 2 488 780
Credit Balances
Share capital 450 000 180 000
General Reserve 80 000 30 000
Plant Maintenance Reserve – 10 000
Available-for-Sale Financial Assets Reserve 40 000 5 000
Retained earnings (1/7/11) 89 500 165 340
Dividend Payable 6 000 8 000
Accounts Payable 37 000 43 400
Loan Payable – Olympus Ltd – 35 000
Loan Payable (due 1/7/15) 100 000 50 000
Current Tax Liability 65 200 89 000
Deferred Tax Liability 19 250 26 040
Annual Leave Entitlements 50 000 25 000
Sales Revenue 1 830 000 1 517 000
Dividend Revenue 23 500 3 200
Proceeds on sale of non-current assets 5 000 44 000
Other Revenue 62 900 16 000
Transfer from plant maintenance reserve – 20 000
Accumulated impairment – Goodwill – 5 000
Accumulated depreciation – Buildings 56 000 40 000
Accumulated depreciation – Plant 252 000 148 000
Accumulated depreciation – Office Furniture 6 200 13 800
Accumulated depreciation – Delivery Truck 28 100 15 000
$3 200 650 $2 488 780
Assignment Tasks
1. Acquisition analysis at 1 July 2008.
2. The BCVR & pre-acquisition worksheet journal entries ONLY at 30 June 2011
3. The consolidation worksheet journal entries at 30 June 2012
4. The consolidation worksheet for Olympus Ltd at 30 June 2012 Use the worksheet template attached to complete the consolidation worksheet.
5. The consolidated financial statements for Olympus Ltd at 30 June 2012
Account Name Olympus
Ltd Delphi
Ltd Adjustments Group
Dr Cr
Cash 90 620 96 145
Receivables 36 000 83 800
Dividend Receivable 8 000 1 200
Inventory 72 000 97 800
Available-for-Sale -Financial assets 90 250 27 250
Loan Receivable – Delphi Ltd 35 000 –
Shares in Delphi Ltd 360 000 –
Deferred Tax Assets 32 080 24 725
Land 125 000 50 000
Buildings 120 000 75 000
Plant 450 000 320 000
Delivery Truck 75 000 120 000
Office Furniture 15 000 26 000
Goodwill 28 000 12 000
Cost of Sales 1 440 100 1 196 500
Amortisation & Depreciation 60 000 54 100
Impairment Loss – 5 000
CA of NCA sold 4 500 11 000
Damages Expense – 28 000
Other expenses 63 000 162 400
Income tax expense 68 100 79 860
Dividend paid 12 000 10 000
Dividend declared 6 000 8 000
Transfer to General Reserve 10 000 –
Total debit balances 3 200 650 2 488 780
Olympus
Ltd Delphi
Ltd Adjustments Group
Dr Cr
Share Capital 450 000 180 000
General Reserve 80 000 30 000
Plant Maintenance Reserve – 10 000
Available for Sale – Financial Assets Res. 40 000 5 000
BCVR – –
Retained Earnings (1/7/11) 89 500 165 340
Dividend Payable 6 000 8 000
Accounts Payable 37 000 43 400
Loan Payable – Olympus Ltd – 35 000
Loan Payable (due 1/7/15) 100 000 50 000
Current Tax Liability 65 200 89 000
Deferred Tax Liability 19 250 26 040
Annual Leave Entitlements 50 000 25 000
Sales Revenue 1 830 000 1 517 000
Dividend Revenue 23 500 3 200
Proceeds on sale of NCA 5 0000 44 000
Other Revenue 62 900 16 000
Transfer from PMR – 20 000
Transfer from BCVR
Accum. Impairment – Goodwill – 5 000
Accum. Depreciation –Buildings 56 000 40 000
Accum. Depreciation –Plant 252 000 148 000
Accum Depreciation –Office Furniture 6 200 13 800
Accum. Depreciation – Delivery Truck 28 100 15 000
Gain on Settlement – –
Total Credit Balances 3 200 650 2 488 780
