Scarlet Ltd acquired 100% of the shares of Rain Ltd on 1 July 20X3 for $3,500,000....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Scarlet Ltd acquired 100% of the shares of Rain Ltd on 1 July 20X3 for $3,500,000. Shareholders' funds of Rain Ltd at the time of acquisition were: $ Share capital Retained earnings 1,700,000 1,450,000 3,150,000 All assets of Rain Ltd are recorded at fair value on the acquisition date. During the 20X4 financial year, Rain Ltd sells inventory to Scarlet Ltd at a sale price of $700,000. The inventory cost Rain Ltd $420,000 to produce. At 30 June 20X4, half of the inventory is still on hand with Scarlet Ltd. The directors believe that there has been an impairment loss on the goodwill of $35,000 for the year ended 30 June 20X4. The tax rate for 20X4 financial year is 30%. The financial statements of Scarlet Ltd and Rain Ltd at 30 June 20X4 are as follows: Scarlet Ltd ($000) Rain Ltd ($000) Reconciliation of opening and closing retained earnings Sales revenue less Cost of goods sold less Other expenses Other revenue Profit Tax expense Profit after tax Retained earnings-1 July 20X3 Dividends paid Retained earnings-30 June 20X4 Statement of financial position Shareholders' equity Retained earnings Share capital Current liabilities Accounts payable Non-current liabilities Loans Current assets Cash Accounts receivable Inventory Non-current assets Land Plant Investment in Rain Ltd Future income tax benefit Goodwill 4,200 (1,750) (210) 245 2,485 (700) 1,785 3,500 5,285 (700) 4,585 4,585 14,000 350 2,100 21,035 875 525 2,100 5,040 8,645 3,500 350 21,035 Requirement Prepare the followings for Scarlet Ltd and its controlled entity: a) Consolidation worksheet entries for 30 June 20X4 b) Consolidated financial statements for the year ended 30 June 20X4 700 (490) (105) 88 893 (350) 543 1,400 1,943 (140) 1,803 1,803 1,750 298 875 4,725 88 613 1,050 1,400 1,400 175 = 4,725 Scarlet Ltd acquired 100% of the shares of Rain Ltd on 1 July 20X3 for $3,500,000. Shareholders' funds of Rain Ltd at the time of acquisition were: $ Share capital Retained earnings 1,700,000 1,450,000 3,150,000 All assets of Rain Ltd are recorded at fair value on the acquisition date. During the 20X4 financial year, Rain Ltd sells inventory to Scarlet Ltd at a sale price of $700,000. The inventory cost Rain Ltd $420,000 to produce. At 30 June 20X4, half of the inventory is still on hand with Scarlet Ltd. The directors believe that there has been an impairment loss on the goodwill of $35,000 for the year ended 30 June 20X4. The tax rate for 20X4 financial year is 30%. The financial statements of Scarlet Ltd and Rain Ltd at 30 June 20X4 are as follows: Scarlet Ltd ($000) Rain Ltd ($000) Reconciliation of opening and closing retained earnings Sales revenue less Cost of goods sold less Other expenses Other revenue Profit Tax expense Profit after tax Retained earnings-1 July 20X3 Dividends paid Retained earnings-30 June 20X4 Statement of financial position Shareholders' equity Retained earnings Share capital Current liabilities Accounts payable Non-current liabilities Loans Current assets Cash Accounts receivable Inventory Non-current assets Land Plant Investment in Rain Ltd Future income tax benefit Goodwill 4,200 (1,750) (210) 245 2,485 (700) 1,785 3,500 5,285 (700) 4,585 4,585 14,000 350 2,100 21,035 875 525 2,100 5,040 8,645 3,500 350 21,035 Requirement Prepare the followings for Scarlet Ltd and its controlled entity: a) Consolidation worksheet entries for 30 June 20X4 b) Consolidated financial statements for the year ended 30 June 20X4 700 (490) (105) 88 893 (350) 543 1,400 1,943 (140) 1,803 1,803 1,750 298 875 4,725 88 613 1,050 1,400 1,400 175 = 4,725
Expert Answer:
Answer rating: 100% (QA)
a Consolidation Worksheet Entries for 30 June 20X4 Scarlet Ltd Rain Ltd Noncurrent assets Land 3500 350 Plant 350 175 Investment in Rain Ltd 3500 Future Income Tax Benefit 875 Goodwill 4725 Current As... View the full answer
Related Book For
International Financial Reporting A Practical Guide
ISBN: 978-1292200743
6th edition
Authors: Alan Melville
Posted Date:
Students also viewed these finance questions
-
Sales revenue less cost of goods sold is called net profit. A. True B. False
-
Do you believe that there has been a significant shift or evolution over the past several decades in the concept of professionalism as it relates to the public accounting discipline? If so, explain...
-
Employee health records indicate that there has been an increase in the number of work days lost per employee as a result of accidents that occur on the job. This likely indicates that: A. More...
-
How does the trade-off between decision management and decision control affect the form that an absorption cost system takes within a particular firm?
-
Differential Analysis for Sales Promotion Proposal Sole Mates Inc. is planning a one-month campaign for May to promote sales of one of its two shoe products. A total of $130,000 has been budgeted for...
-
Imagine that at the conclusion this course, you will be interviewed by The Christian Science Monitor for their story on the many perspectives about the historical Jesus. It is a brief interview so...
-
Why is involvement of top management important to the success of a corporate environmental management and accounting system?
-
Millie Company produces a product that passes through an assembly process and a finishing process. All manufacturing costs are added uniformly for both processes. The following information was...
-
Calculate the force vectors needed to (i) keep the deflector blade stationary; (ii) needed to move the blade to the right 60 fps; (iii) needed to move the blade to the left 60 fps. 5 2 in. dia. 120...
-
Mr. M has been employed as an engineer by A Ltd., a company incorporated in Hong Kong. During the year ended 31 March 2019, Mr. M had the following income and expenditure. A monthly salary of...
-
The Richter scale is a measure of the intensity of an earthquake. The magnitude M (unitless) of an earthquake as measured on the Richter scale is E 2, M = log10 E where Eo = 104.4 Joules is a...
-
What would happen to the profit and risk if the firm shifts capital from the long-term liability to the current liability?
-
List and briefly explain three common strategies for the firm to finance its permanent and temporary capital needs.
-
What is the difference between risk and uncertainty? Where would the risk come from? And what are the methods of risk management?
-
What would financial management of working capital aim to?
-
Give a practical example of how a firm can use its balanced approach for financing its capital needs.
-
Kris has two choices for a part-time job after school. Kris could make $10 per hour entering data for a local company, but none of his friends work there. The second job offer pays $8 per hour at a...
-
In muscle tissue, the ratio of phosphorylase a to phosphorylase b determines the rate of conversion of glycogen to glucose 1phosphate. Classify how each event affects the rate of glycogen breakdown...
-
On 1 March 2018, YY Ltd acquired 85% of the ordinary share capital of ZZ Ltd. There are no preference shares. Both companies prepare financial statements to 31 October each year. Transactions between...
-
Accounting standard IAS16 Property, Plant and Equipment makes a number of recognition, measurement and disclosure requirements with regard to tangible non current assets. The term "non-current asset"...
-
On 1 October 2017 Pumice acquired the following non-current investments: (i) 80% of the equity share capital of Silverton at a cost of £13.6 million. (ii) 50% of Silverton's 10% loan notes at...
-
A compound pendulum in the shape of a rectangle is supported at point \(O\) and allowed to oscillate. The dimensions of the rectangle are given in Figure 2.61. Calculate the natural frequency for...
-
Two springs in series support weight \(W\), as shown in Figure 2.62. If these springs are replaced by a single spring, find the equivalent stiffness as well as the period of oscillation. The solution...
-
A pendulum of mass \(m\) and mass moment of inertia \(I_{O}\) is suspended from a hinge, as shown in Figure 2.63. The center of gravity is located a distance \(h\) from the hinge. For small...
Study smarter with the SolutionInn App