You are the Senior Financial Accountant for the public company, Re-Wood Design Ltd. Re-Wood Deign Ltd...

Transcribed Image Text:

You are the Senior Financial Accountant for the public company, Re-Wood Design Ltd. Re-Wood Deign Ltd uses recycled wood to produce outdoor furniture. The company has its main office located in Melbourne and operates several factories in overseas locations. Recently, Re-Wood Design Ltd acquired control of another company, LG Gardens Ltd. LG Gardens Ltd is a manufacturer of custom designed furniture and is located in a small town in a developing country. Its operations are located next to pristine rainforest. You are working with the financial accounting team to prepare the 2023 financial statements. You have obtained the following information regarding Re-Wood Design Ltd's acquisition of LG Gardens Ltd. The acquisition occurred on 1 January 2023, and Re-Wood Design Ltd acquired all the issued shares (cum div.) of LG Gardens Ltd for consideration of $7,400,000. At the date of acquisition, LG Garden Ltd's Statement of Financial Position showed the following balances: Share capital 2,500,000 shares Retained earnings General reserve Asset revaluation surplus Dividend Payable $5,000,000 1,650,000 420,000 240,000 150,000 The dividend payable of $150,000 recorded by LG Gardens Ltd at the acquisition date was paid on 15 August 2023. At the acquisition date, all the identifiable assets and liabilities of LG Gardens Ltd were recorded at amounts equal to fair value except for: Inventory Land Carrying amount $550,000 Fair value $1,600,000 $630,000 $1,840,000 $480,000 Machinery (cost $600,000) $450,000 The machinery has a further five-year useful life and is depreciated on a straight-line basis. The inventory on hand at acquisition was sold by 1 March 2023. The land on hand at acquisition was sold by 30 November 2023. The tax rate is 30%. INSTRUCTIONS A. Prepare the acquisition analysis for Re-Wood Design Ltd at 1 January 2023. B. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 1 January 2023. All workings and narrations must be provided. C. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 30 June 2023. All workings and narrations must be provided. D. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 30 June 2024. All workings and narrations must be provided. E. In relation to Part D above, discuss why the BCVR consolidation journal entries for Machinery are needed, explaining the adjustment to each account separately. (12+20 +24+ 24 + 20 = 100 marks) You are the Senior Financial Accountant for the public company, Re-Wood Design Ltd. Re-Wood Deign Ltd uses recycled wood to produce outdoor furniture. The company has its main office located in Melbourne and operates several factories in overseas locations. Recently, Re-Wood Design Ltd acquired control of another company, LG Gardens Ltd. LG Gardens Ltd is a manufacturer of custom designed furniture and is located in a small town in a developing country. Its operations are located next to pristine rainforest. You are working with the financial accounting team to prepare the 2023 financial statements. You have obtained the following information regarding Re-Wood Design Ltd's acquisition of LG Gardens Ltd. The acquisition occurred on 1 January 2023, and Re-Wood Design Ltd acquired all the issued shares (cum div.) of LG Gardens Ltd for consideration of $7,400,000. At the date of acquisition, LG Garden Ltd's Statement of Financial Position showed the following balances: Share capital 2,500,000 shares Retained earnings General reserve Asset revaluation surplus Dividend Payable $5,000,000 1,650,000 420,000 240,000 150,000 The dividend payable of $150,000 recorded by LG Gardens Ltd at the acquisition date was paid on 15 August 2023. At the acquisition date, all the identifiable assets and liabilities of LG Gardens Ltd were recorded at amounts equal to fair value except for: Inventory Land Carrying amount $550,000 Fair value $1,600,000 $630,000 $1,840,000 $480,000 Machinery (cost $600,000) $450,000 The machinery has a further five-year useful life and is depreciated on a straight-line basis. The inventory on hand at acquisition was sold by 1 March 2023. The land on hand at acquisition was sold by 30 November 2023. The tax rate is 30%. INSTRUCTIONS A. Prepare the acquisition analysis for Re-Wood Design Ltd at 1 January 2023. B. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 1 January 2023. All workings and narrations must be provided. C. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 30 June 2023. All workings and narrations must be provided. D. Prepare the BCVR and pre-acquisition consolidation journal entries for Re-Wood Design Ltd at 30 June 2024. All workings and narrations must be provided. E. In relation to Part D above, discuss why the BCVR consolidation journal entries for Machinery are needed, explaining the adjustment to each account separately. (12+20 +24+ 24 + 20 = 100 marks)