The following financial statements of EMU Ltd and its subsidiary Cassowary Ltd have been extracted from their
Question:
The following financial statements of EMU Ltd and its subsidiary Cassowary Ltd have been extracted from their financial records at 30 June 2019.
EMU Ltd ($) | Cassowary Ltd ($) | |
Detailed reconciliation of opening and closing retained earnings | ||
Sales revenue | 1 725 000 | 1 450 000 |
Cost of goods sold | (1 160 000) | (595 000) |
Gross profit | 565 000 | 855 000 |
Dividend revenue—from Cassowary Ltd | 186 000 | |
Management fee revenue | 66 250 | |
Profit on sale of plant | 87 500 | |
Expenses: | ||
Administrative expenses | (77 000) | (96 750) |
Depreciation | (61 250) | (142 000) |
Management fee expense | (66 250) | |
Other expenses | (252 750) | (192 500) |
Profit before tax | 513 750 | 357 500 |
Tax expense | 153 750 | 105 500 |
Profit for the year | 360 000 | 252 000 |
Retained earnings—1 July 2018 | 798 500 | 598 000 |
1 158 500 | 850 000 | |
Dividends paid | (343 500) | (232 500) |
Retained earnings—30 June 2019 | 815 000 | 617 500 |
Statement of financial position | ||
Shareholders’ equity: | ||
Retained earnings | 815 000 | 617 500 |
Share capital | 875 000 | 500 000 |
Current liabilities: | ||
Accounts payable | 136 750 | 115 750 |
Tax payable | 103 250 | 62 500 |
Non-current liabilities: | ||
Loans | 433 750 | 290 000 |
2 363 750 | 1 585 750 | |
Current assets: | ||
Accounts Receivable | 148 500 | 155 750 |
Inventory | 230 000 | 72 500 |
Non-current assets: | ||
Land and buildings | 560 000 | 815 000 |
Plant at cost | 749 625 | 889 500 |
Accumulated depreciation | (214 375) | (347 000) |
Investment in Cassowary Ltd | 890 000 | |
2 363 750 | 1 585 750 |
Additional information:
- EMU Ltd had acquired its 80 per cent interest in Cassowary Ltd on 1 July 2010, that is, nine
years earlier. At that date the capital and reserves of Cassowary Ltd were:
Share capital $500 000
Retained earnings $425 000
Total $925 000
At the date of acquisition all assets were considered to be fairly valued.
- The management of EMU Ltd measures any non-controlling interest at the proportionate share of Cassowary Ltd’s identifiable net assets.
- During the year, EMU Ltd made total sales to Richards Ltd of $162 500, while Cassowary Ltd sold $130 000 in inventory to EMU Ltd.
- The opening inventory in EMU Ltd as at 1 July 2018 included inventory acquired from Cassowary Ltd of $105 000 that had cost Cassowary Ltd $87 500 to produce.
- The closing inventory in EMU Ltd includes inventory acquired from Cassowary Ltd at a cost of $84 000. This had cost Cassowary Ltd $70 000 to produce.
- The closing inventory of Cassowary Ltd includes inventory acquired from EMU Ltd at a cost of $30 000. This had cost EMU Ltd $24 000 to produce.
- The management of EMU Ltd believe that goodwill acquired was impaired by $7500 in the
current financial year. Previous impairments of goodwill amounted to $56 250.
- On 1 July 2018 EMU Ltd sold an item of plant to Cassowary Ltd for $290 000 when its carrying value in EMU Ltd’s accounts was $202 500 (cost of $337 500, accumulated depreciation of $135 000). This plant is assessed as having a remaining useful life of six years.
- Cassowary Ltd paid $66 250 in management fees to EMU Ltd.
- The tax rate is 30 per cent.
REQUIRED:
- Calculate goodwill on acquisition.
- Prepare all consolidation journal entries including non-controlling interest.
- Prepare consolidation worksheet.
- Prepare consolidated statement of profit and loss and other comprehensive income of EMU ltd and its subsidiary for the year ended 30 June 2019.
- Prepare consolidated statement financial position of EMU Ltd and its subsidiaries as at 30 June 2019.
- Prepare EMU Ltd and its controlled entity Consolidated statement of changes in equity for the year ended 30 June 2019.
- Prepare EMU Ltd Statement of changes in equity for the year ended 30 June 2019.