You have just started up a small accounting firm, and you have been hired by two clients.
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Question:
You have just started up a small accounting firm, and you have been hired by two clients. B & B Ltd. needs you to prepare a consolidated Balance Sheet and G Ltd. needs you to prepare a consolidated Trading, Profit and Loss Account.
B & B Ltd. acquired all of the share capital in AR Ltd. on December 31, 2016 when the reserves of the latter amounted to $20,000. The balance sheets of B & B Ltd. and AR Ltd. as at December 31, 2017 were as follows:
B & B Ltd. | AR Ltd. | |||
Tangible fixed assets | 194,000 | 66,000 | ||
Investments in AR Ltd. at cost. | 86,000 | |||
Stock | 67,200 | 36,000 | ||
Debtors | 34,800 | 13,600 | ||
Bank | 22,400 | 9,200 | ||
124,400 | 58,800 | |||
Less: creditors | (18,000) | 106,400 | (10,000) | 48,800 |
386,400 | 114,800 | |||
Capital and reserves | ||||
Ordinary shares of $1 each | 280,000 | 80,000 | ||
Reserves | 106,400 | 34,800 | ||
386,400 | 114,800 |
Additional Information:
- At December 31, 2017, AR Ltd. owed B & B Ltd. $4,000.
- Included in the stock of B & B Ltd. are goods that were purchased from AR Ltd. for $24,000. AR Ltd. sells goods to B & B Ltd. at cost plus $20%.
Required
- Prepare the consolidated balance sheet for the group as at December 31, 2017 (12 marks)
- Provide notes to the statement showing the treatment for:
- unrealized profit (4 marks)
- inter-company indebtedness (5 marks)
- capital and reserves (5 marks)
- goodwill (4 marks)
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
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