ACCT2006 Assignment – Victoria Ltd acquired 70% of the shares

ACCT2006 Assignment – Semester 1, 2016On 1 July 2015, Victoria Ltd acquired 70% of the shares of Melbourne Ltd for $526,000 on a cum div.basis. Victoria Ltd had acquired 30% of the shares of Melbourne Ltd two years earlier for $180,000.This investment, classified as an available-for-sale investment, was recorded at a fair value on 1 July2015 of $226,000. At 1 July 2015, the equity and liability sections of Melbourne Ltd’s statement offinancial position showed the following balances:Share CapitalGeneral ReserveRetained EarningsOther liabilitiesDividend payable460,00050,000100,000100,00030,000At acquisition date, all the identifiable assets and liabilities of Melbourne Ltd were recorded atamounts equal to fair value except for:LandVehicle (@ cost 40,000)Equipment (@ cost 420,000)InventoryCarrying Amount95,00035,000294,00098,000Fair Value100,00039,000309,000101,000The Vehicle, which was estimated to have a further four year life at acquisition date, was sold on 1January 2018. The equipment had a further five year life at acquisition date and was expected to beused evenly over that time. Any adjustments for differences between carrying amounts at acquisitiondate and fair values are made on consolidation.Melbourne Ltd had not recorded an internally developed patent. Victoria Ltd valued this patent at$90,000 and was assumed to have a ten year life. In May 2017, Melbourne sold this patent to anexternal party for $100,000. It also had a contingent liability of $19,000 that Victoria Ltd consideredto have a fair value of $15,000. This liability was settled in July 2017.The dividend liability was paid on 1 September 2015. All inventories on hand at acquisition date weresold by June 2016. The land was sold on 1 June 2018 to Peters Ltd. Any valuation reserves created aretransferred on consolidation to retained earnings when assets are sold or fully consumed.On 30 May 2017, Melbourne Ltd transferred $8,000 from the general reserve (pre-acquisition) toretained earnings. A bonus dividend of $10,000 was paid in December 2017 out of pre-acquisitionprofits.Goodwill was tested annually for impairment. For the year ended 30 June 2017, an impairment losson goodwill of $4,000 was recorded.ACCT2006 Assignment – Semester 1, 2016Additional information:(i)Melbourne Ltd sold a warehouse with a carrying amount of $82,000 to Victoria Ltd for$100,000. The transaction took place on 1 January 2017. Victoria Ltd charges depreciation at5% p.a. on a straight-line basis.(ii)On 31 March 2017, Victoria Ltd sold some land to Melbourne Ltd. The land had originallycost Victoria Ltd $64,000, but was sold to Melbourne Ltd for $63,000. To help Melbourne Ltdpay for the land, Victoria Ltd gave Melbourne Ltd an interest-free loan of $29,000.Melbourne Ltd has as yet made no repayments on the loan.(iii)In April 2017, Victoria Ltd sold inventory to Melbourne Ltd for $12,000, at a mark-up of 20%on cost. One quarter of this inventory was unsold by Melbourne Ltd at 30 June 2017. Theremaining inventory was sold in the following three months.(iv)On 1 October 2017, Victoria Ltd issued 1,000 15% debentures of $100 at nominal value.Melbourne Ltd acquired 400 of these. Interest is payable half-yearly on 31 March and 30September. Accruals have been recognised in the legal entities’ accounts.(v)On 18 February 2018, interim dividend was paid by Melbourne Ltd from profits beforeacquisition date. The final dividend was from current year profits. Shareholder approval is notrequired in relation to dividends.(vi)On 1 April 2018, Melbourne Ltd transferred an item of plant with a carrying amount of$32,000 to Victoria Ltd for $41,000. Victoria Ltd treated this item as inventory. The item wasstill on hand at the end of the year. Melbourne Ltd applied a 20% depreciation rate to thisplant.(vii)During the year ending 30 June 2018, Melbourne Ltd sold inventory to Victoria Ltd for$60,000, recording a before-tax profit of $16,000. One quarter of this inventory was unsoldby Victoria Ltd at 30 June 2018.(viii)The tax rate is 30%.ACCT2006 Assignment – Semester 1, 2016On 30 June 2018 the trial balances of Victoria Ltd and Melbourne Ltd were as follows:Cost of salesOther expensesIncome tax expenseInterim dividend paidFinal dividend declaredCashDividend receivableOther receivablesInventoryDeferred tax assetsVehiclesPlant & equipmentLandWarehousesDebentures in Victoria LtdShares in Melbourne LtdGoodwillLoan to Melbourne LtdSalesOther revenue & incomeShare capitalShare optionsGeneral reserveRetained earnings (1/7/2017)Final dividend payableCurrent tax liabilitiesOther liabilitiesDebenturesLoan from Victoria LtdAccumulated depreciation – P & EAccumulated depreciation – VehicleAccumulated depreciation – WarehousesVictoria Ltd338,00080,00041,00021,00022,000181,00020,000206,000244,00035,00082,000648,000130,000180,000722,00074,00029,0003,053,000Melbourne Ltd307,00072,00040,00014,00015,000105,000227,000132,00072,000380,000123,00090,00040,00030,0001,647,000480,00079,000874,00080,00084,000490,00022,0008,00096,000400,000388,00025,00027,0003,053,000437,00056,000470,00072,000228,00015,00012,00060,00029,000228,00022,00018,0001,647,000ACCT2006 Assignment – Semester 1, 2016Requireda)Prepare the acquisition analysis as at 1 July 2015. (3 Marks).Marking guide: total of 12 ticks / 4 = 3 marks.Consequential errors will be penalised.b)Prepare the BVCR and pre-acquisition worksheet entries ONLY as at 30 June 2016. (5 marks)Marking guide: total of 41 ticks / 8.2 = 5 marks.Journal entry – 1 tick for each correct line entry – i.e. correct account description AND amount (NOTICK for correct description only or correct amount only.)Consequential errors will not be penalised.c)Prepare full consolidation worksheet entries as at 30 June 2018. (12 marks)Marking guide: total of 82 ticks / 6.83 = 12 marks.Journal entry – 1 tick for each correct line entry – ie correct account description AND amount (NOTICK for correct description only or correct amount only.)Consequential errors will not be penalised.