On 1 July 2015, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd...

    

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On 1 July 2015, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd paid $30 000 in cash and 20 000 shares in Fluffy Ltd valued at $3 per share. At this date, the equity of Glider Ltd consisted of $66 000 share capital and $6000 retained earnings. At 1 July 2015, all the identifiable assets and liabilities of Glider Ltd were recorded at amounts equal to their fair values except for: Plant (cost $150 000) Patents Inventory $120 000 90 000 000 18 $123 000 105 000 22 500 The plant was considered to have a further 5-year life. The patents were sold for $120 000 to an external entity on 18 August 2015. The inventory was all sold by 30 June 2016. Additional information (a) Fluffy Ltd sells certain raw materials to Glider Ltd to be used in its manufacturing process. At 1 July 2016, Glider Ltd held inventory sold to it by Fluffy Ltd in the previous year at a profit of $600. During the 2016-17 year, Fluffy Ltd sold inventory to Glider Ltd for $21 000. None of this was on hand at 30 June 2017. (b) Glider Ltd also sells items of inventory to Fluffy Ltd. During the 2016-17 year, Glider Ltd sold goods to Fluffy Ltd for $4500. At 30 June 2017, inventory which had been sold to Fluffy Ltd at a profit of $300 was still on hand in Fluffy Ltd's inventory. (c) On 1 July 2016, Glider Ltd sold an item of plant to Fluffy Ltd for $15 000. This plant had a carrying amount in the records of Glider Ltd of $14 000 at time of sale. This type of plant is depreciated at 10% p.a. on cost. (d) On 1 January 2015, Fluffy Ltd sold an item of inventory to Glider Ltd for $18 000. The inventory had cost Fluffy Ltd $16 000. This item was classified by Glider Ltd as plant. Plant of this type is depreciated by Glider Ltd at 20% p.a. (e) On 1 March 2017, Glider Ltd sold an item of plant to Fluffy Ltd. Whereas Glider Ltd classified this as plant, Fluffy Ltd classified it as inventory. The sales price was $9000 which included a profit to Glider Ltd of $1500. Fluffy Ltd sold this to another entity on 31 March for $9900. (f) The tax rate is 30%. At 30 June 2017, the following financial information was provided by the two companies: Sales revenue Cost of sales Trading expenses Office expenses Depreciation expenses Proceeds on sale of plant Carrying amount of plant sold Income tax expense Share capital Retained earnings (1/7/16) Current liabilities Deferred tax liability Plant Accumulated depreciation - plant Intangibles Deferred tax assets Shares in Glider Ltd Inventory Receivables Dr Fluffy Ltd 30 900 4 800 7950 1 800 7 500 11 100 57 000 12 000 8 100 90 000 28 500 8 250 267 900 Cr 64 500 9 000 96 000 48 000 21 100 11 000 18 300 267 900 Dr Glider Ltd 46 350 9 000 4 050 3.900 14 000 7 300 107 250 11 100 9 450 0 24 600 12 450 249 450 Cr 78 000 15 000 66 000 31 500 10 500 15 000 33 450 249 450 Required Prepare a consolidation worksheet for the preparation of the consolidated financial statements of Fluffy Ltd at 30 June 2017. On 1 July 2015, Fluffy Ltd acquired all the issued shares of Glider Ltd. Fluffy Ltd paid $30 000 in cash and 20 000 shares in Fluffy Ltd valued at $3 per share. At this date, the equity of Glider Ltd consisted of $66 000 share capital and $6000 retained earnings. At 1 July 2015, all the identifiable assets and liabilities of Glider Ltd were recorded at amounts equal to their fair values except for: Plant (cost $150 000) Patents Inventory $120 000 90 000 000 18 $123 000 105 000 22 500 The plant was considered to have a further 5-year life. The patents were sold for $120 000 to an external entity on 18 August 2015. The inventory was all sold by 30 June 2016. Additional information (a) Fluffy Ltd sells certain raw materials to Glider Ltd to be used in its manufacturing process. At 1 July 2016, Glider Ltd held inventory sold to it by Fluffy Ltd in the previous year at a profit of $600. During the 2016-17 year, Fluffy Ltd sold inventory to Glider Ltd for $21 000. None of this was on hand at 30 June 2017. (b) Glider Ltd also sells items of inventory to Fluffy Ltd. During the 2016-17 year, Glider Ltd sold goods to Fluffy Ltd for $4500. At 30 June 2017, inventory which had been sold to Fluffy Ltd at a profit of $300 was still on hand in Fluffy Ltd's inventory. (c) On 1 July 2016, Glider Ltd sold an item of plant to Fluffy Ltd for $15 000. This plant had a carrying amount in the records of Glider Ltd of $14 000 at time of sale. This type of plant is depreciated at 10% p.a. on cost. (d) On 1 January 2015, Fluffy Ltd sold an item of inventory to Glider Ltd for $18 000. The inventory had cost Fluffy Ltd $16 000. This item was classified by Glider Ltd as plant. Plant of this type is depreciated by Glider Ltd at 20% p.a. (e) On 1 March 2017, Glider Ltd sold an item of plant to Fluffy Ltd. Whereas Glider Ltd classified this as plant, Fluffy Ltd classified it as inventory. The sales price was $9000 which included a profit to Glider Ltd of $1500. Fluffy Ltd sold this to another entity on 31 March for $9900. (f) The tax rate is 30%. At 30 June 2017, the following financial information was provided by the two companies: Sales revenue Cost of sales Trading expenses Office expenses Depreciation expenses Proceeds on sale of plant Carrying amount of plant sold Income tax expense Share capital Retained earnings (1/7/16) Current liabilities Deferred tax liability Plant Accumulated depreciation - plant Intangibles Deferred tax assets Shares in Glider Ltd Inventory Receivables Dr Fluffy Ltd 30 900 4 800 7950 1 800 7 500 11 100 57 000 12 000 8 100 90 000 28 500 8 250 267 900 Cr 64 500 9 000 96 000 48 000 21 100 11 000 18 300 267 900 Dr Glider Ltd 46 350 9 000 4 050 3.900 14 000 7 300 107 250 11 100 9 450 0 24 600 12 450 249 450 Cr 78 000 15 000 66 000 31 500 10 500 15 000 33 450 249 450 Required Prepare a consolidation worksheet for the preparation of the consolidated financial statements of Fluffy Ltd at 30 June 2017.

Answer rating: 100% (QA)

Answer At 1 July 2015 Net fair value of identifiable assets and liabilities of Glider Ltd 66 000 6 000 equity 4 500 1 30 inventory 15 000 1 30 patents 3 000 1 30 plant 87 750 Consideration transferred ... View the full answer