PART A CONSOLIDATIONS: Hellier LTD & Sub LTD
Acquisition of Sub Ltd On 1st July 2012, Hellier Ltd acquired 80% of the share capital of Sub Ltd for $11,500,000. At this date, the accounts of Sub Ltd included the following balances:
Share capital (10,000,000 shares) $10,000,000
General reserve 1,100,000
Retained profits 2,190,000
All of the identifiable net assets of Sub Ltd were recorded at fair value except for Land which had a fair value of $200,000 above the carrying amount. Adjustments for the differences are made on consolidation and tax-effect entries are NOT needed.
Additional Information:
On the 15 September 2012, Sub Ltd paid a cash dividend of $1,000,000 (from pre-acquisition profits). This amount was recognised as revenue by Hellier Ltd. The Financial Controller of Hellier Ltd felt that the dividend had impaired the value of the company’s investment in Sub Ltd and subsequently records an impairment of the Investment in Sub Account for the applicable amounts received as a dividend.
The following is a list of the transactions between the companies for the year ended June 2014:
(a) On 1st June 2014, Sub Ltd sold inventory to Hellier Ltd for $915,000, at a mark-up of 50%. At 30th June 2014, $165,000 of this inventory was still on hand
(b) On 3 March 2013, Hellier Ltd sold some inventory to Sub Ltd for $650,000, at a profit before tax of $230,000. This was still on hand in Sub Ltd at 30 June 2013, but was all sold by 30th June 2014
(c) On 1st January 2013, Sub Ltd sold an item of equipment to Hellier Ltd for $550,000 at a before tax loss of $75,000. The equipment has a useful life of 5 years and is depreciated using the straight-line method by both companies.
(d) Hellier Ltd extended a loan of $700,000 to Sub Ltd. This loan was issued on the 1stSeptember 2013 payable over 10 years, with an interest rate on the loan of 3.5% pa. Interest is paid on the 31st March and 30th September every year.
(e) A goodwill impairment test in June 2014 revealed the need to impair goodwill by 10%. No other impairment of goodwill has been recorded. For consolidation purposes the partial goodwill method is used.
(f) During the year Hellier Ltd paid $78,000 for Staff Training to Sub Ltd. This amount is disclosed under General Administrative Expenses by Hellier Ltd.
(g) All dividends are recognised before receipt of cash.
(h) The corporate income tax rate is 30% and the companies in the group have financial years from 1st July to 30th June
|
Accounts |
Hellier Ltd |
Sub Ltd |
|
30/06/2014 |
30/06/2014 |
|
|
Balance Sheet Accounts |
||
|
Cash and Cash equivalents |
$4,672,457 |
$2,697,260 |
|
Debtors |
$3,099,625 |
$2,500,366 |
|
Allowance for Doubtful Debts |
-$245,500 |
-$180,033 |
|
Accruals & Other Receivables |
$129,967 |
$245,310 |
|
Inventory |
$499,517 |
$375,800 |
|
Goodwill |
$0 |
$448,394 |
|
Prepayments |
$1,135,476 |
$832,690 |
|
Loans Receivable |
$1,700,000 |
$256,670 |
|
Motor Vehicles |
$1,665,057 |
$814,750 |
|
Accumulated Depreciation – Vehicles |
-$166,506 |
-$122,104 |
|
Marketable Securities |
$185,006 |
$1,135,670 |
|
Investment in Sub Ltd |
$11,500,000 |
$0 |
|
Accumulated Impairment of Investment |
-$800,000 |
$0 |
|
Dividend and Interest Receivable |
$2,477,010 |
$350,484 |
|
Intangibles |
$8,792,390 |
$4,697,750 |
|
Accumulates Amortisation on Intangibles |
$870,000 |
$0 |
|
Debentures in Eastfield Ltd |
$328,970 |
$0 |
|
Property, Plant and Equipment |
$6,937,735 |
$5,231,220 |
|
Accumulated Depreciation – PPE |
-$2,312,578 |
-$1,695,850 |
|
Land |
$6,123,000 |
$4,988,000 |
|
Deferred Tax Asset |
$1,500,000 |
$925,550 |
|
TOTAL |
$46,351,626 |
$23,501,927 |
|
Deferred Tax Liability |
$517,462 |
895,305 |
|
Tax Payable |
$1,525,655 |
$385,535 |
|
Dividends & Other Amts Payable |
$3,512,000 |
$1,637,600 |
|
Creditors |
$2,983,658 |
$1,445,610 |
|
Other Liabilities & Provisions |
$4,460,200 |
$720,072 |
|
Loans |
$0 |
$700,000 |
|
Debentures (3.5%) |
$1,534,040 |
$1,933,300 |
|
General Reserve |
$4,720,061 |
$3,469,145 |
|
Other Capital Reserve |
$8,189,470 |
$721,614 |
|
Issued Share Capital ($1 ORD A shares) |
$12,969,000 |
$10,000,000 |
|
Issued Share Capital ($0.50 Pref.shares) |
$275,000 |
$201,600 |
|
Retained Profits (c/b) |
$5,665,080 |
$1,392,146 |
|
Total Liabilities & Equity |
$46,351,626 |
$23,501,927 |
|
|
Hellier Ltd |
Sub Ltd |
|
30/06/2014 |
30/06/2014 |
|
|
Sales Revenue |
$9,313,832 |
$5,588,300 |
|
Stack at Start |
$297,510 |
$183,510 |
|
Purchases |
$3,625,050 |
$2,658,370 |
|
Stock at end |
-$499,517 |
-$375,800 |
|
Cost of Goods Sold |
$3,423,043 |
$2,466,080 |
|
Gross Profit |
$5,890,789 |
$3,122,220 |
|
Less Expenses |
||
|
Expenses from Operations |
$1,460,492 |
$973,670 |
|
General Administration Expenses |
$269,492 |
$296,450 |
|
Depreciation and Amortisation Expenses |
$926,265 |
$917,010 |
|
Impairment Expenses |
$272,500 |
$174,000 |
|
Finance Costs |
$146,802 |
$137,990 |
|
Total Expenses |
$3,075,551 |
$2,499,120 |
|
Add Other Income |
||
|
Dividend and Interest Revenue |
$2,878,080 |
$475,260 |
|
Other Income |
$117,500 |
$325,000 |
|
$2,995,580 |
$800,260 |
|
|
Net Profit before Tax |
$5,810,818 |
$1,423,360 |
|
less Income Tax Expense |
$1,627,029 |
$391,424 |
|
Net Profit after Tax |
$4,183,789 |
$1,031,936 |
|
Add |
||
|
Retained Profits (o/b) |
$5,388,491 |
$2,800,150 |
|
Total Available |
$9,572,280 |
$3,832,086 |
|
Less Appropriations |
||
|
Interim Dividends Paid |
$1,302,400 |
$1,000,000 |
|
Transfer to General Reserve |
$0 |
$189,940 |
|
Dividends (Ordinary) Proposed |
$2,604,800 |
$1,250,000 |
|
Total Appropriations |
$3,907,200 |
$2,439,940 |
|
Retained Profits (c/b) |
$5,665,080 |
$1,392,146 |
REQUIRED:
Consolidate HELLIER Ltd and SUB Ltd:
(a) Prepare the consolidation journal entries, with narrations, and the consolidated worksheet (using Excel or similar) to consolidate HELLIER Ltd and SUB Ltd for the year ended 30th June 2014.
(b) Produce the completed Consolidated Financial Reports (Statement of Comprehensive Income and Statement of Financial Position) for the year ended 30th June 2014.
You are advised to comply with AASB standards and the requirements in the Australian Corporations Legislation when determining the structure and presentation requirements for the financial reports in preparing the financial statements for this assignment
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