accounting-Consolidated Financial Statements with Non-Controlling Interests

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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 Ltd’s accounts
showed: Share capital $300,000 and Retained earnings $125,000. All assets and
liabilities appearing in Bridge Ltd’s financial statements were fairly valued,
except:
·
An
item of Bridge Ltd’s 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
Ltd’s 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
Ltd’sinventories 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
subsidiary’s 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]

 

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