You are a senior accountant in an accounting firm in Australia. Your senior manager has asked you to assist your client, Cherry Ltd, in the preparation of consolidated financial statements for the year ended 30 June 2035. The senior manager hands you a file which contains important information about Cherry Ltd and the acquisition of Blossom Ltd. 

On 1 July 2033, Cherry Ltd acquired all the issued shares (ex. div) of Blossom Ltd for $944,000. At this date the equity of Blossom Ltd consisted of: 

Share capital: $600,000

General reserve: $192,000

Retained earnings: $112,000

The identifiable assets and liabilities recorded on the balance sheet of Blossom Ltd were at amounts equal to fair value. Additional information: 

• Adjustments for differences between carrying amounts and fair values at acquisition date are made on consolidation. 
• The tax rate is 30%. 
• On the day of acquisition, the balance sheet of Blossom Ltd included goodwill of $20,000. 
• On the day of acquisition, Cherry Ltd identified a publishing title with a fair value of $10,000 that was not recorded on the balance sheet of Blossom Ltd. 
• The publishing title was considered to have an indefinite useful life. 
• The goodwill acquired by Cherry Ltd has been impaired by $20,000 on 30 June 2035. 
• On 1 January 2035 Blossom Ltd sold inventories to Cherry Ltd for $100,000. Half of the inventories were still on hand at 30 June 2035. The inventory cost Blossom Ltd $60,000. 
• On 1 January 2034 Blossom Ltd sold inventory to Cherry Ltd for $8,000 which cost $4,000. Cherry Ltd treated this inventory as equipment and depreciates this item at 10% per annum on a straight-line basis. 

Financial information for Cherry Ltd and Blossom Ltd for the year ended 30 June 2035 is shown on the following page. 

Required: 

1. Prepare the consolidation journal entries required to prepare the consolidated accounts for Cherry Ltd Group as at 30 June 2035. 
2. Prepare the consolidation worksheet for the Cherry Ltd Group as at 30 June 2035. 
3. Prepare the consolidated financial statements for the Cherry Ltd Group the year ended 30 June 2035. 

Note: the consolidated financial statements include: consolidated statement of profit and loss and other comprehensive income, consolidated statement of changes in equity, and the consolidated statement of financial position. You are not required to prepare a consolidated statement of cashflows. 

 

 

 

 

 

 

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Sales revenue Financial Information for the year ended 30 June 2035 Service revenue from Blossom Ltd Cherry Ltd 2,381,000 10,000 Blossom Ltd 1,867,000 Interest revenue from Blossom Ltd 1,000 0 Dividend revenue Cost of sales Service expense to Cherry Ltd Interest expense to Cherry Ltd Other expenses 10,000 0 -1,776,000 -1,340,000 0 -10,000 0 -1,000 -143,400 -73,600 -1,919,400 -1,424,600 Profit before tax 482,600 442,400 Income tax expense -194,240 -236,960 Profit for the year 288,360 205,440 Other comprehensive income: Gains on revaluation of equipment (net of tax) 10,000 0 Comprehensive income for the year 298,360 205,440 Profit for the year 288,360 205,440 Retained earnings (1/7/34) 201,640 140,560 490,000 346,000 Dividend paid -160,000 -10,000 Retained earnings (30/6/35) 330,000 336,000 Share capital 1,000,000 600,000 General reserve 270,000 192,000 Asset revaluation surplus Retained earnings Total equity Loan to Cherry Ltd 10,000 36,000 330,000 336,000 1,610,000 1,164,000 0 10,000 Deferred tax liability (DTL) 104,000 60,000 Total liabilities 104,000 70,000 Total equity and liabilities 1,714,000 1,234,000 Cash 150,000 156,000 Accounts receivable 20,000 580,000 Loan receivable from Blossom Ltd 10,000 0 Inventories 336,000 72,000 Land 140,000 240,000 Equipment 134,000 192,000 Accumulated depreciation equipment -20,000 -26,000 Goodwill 0 20,000 Shares in Blossom Ltd 944,000 0 Total assets 1,714,000 1,234,000 Page 2 of 2 387 words 呕 Focus Sales revenue Financial Information for the year ended 30 June 2035 Service revenue from Blossom Ltd Cherry Ltd 2,381,000 10,000 Blossom Ltd 1,867,000 Interest revenue from Blossom Ltd 1,000 0 Dividend revenue Cost of sales Service expense to Cherry Ltd Interest expense to Cherry Ltd Other expenses 10,000 0 -1,776,000 -1,340,000 0 -10,000 0 -1,000 -143,400 -73,600 -1,919,400 -1,424,600 Profit before tax 482,600 442,400 Income tax expense -194,240 -236,960 Profit for the year 288,360 205,440 Other comprehensive income: Gains on revaluation of equipment (net of tax) 10,000 0 Comprehensive income for the year 298,360 205,440 Profit for the year 288,360 205,440 Retained earnings (1/7/34) 201,640 140,560 490,000 346,000 Dividend paid -160,000 -10,000 Retained earnings (30/6/35) 330,000 336,000 Share capital 1,000,000 600,000 General reserve 270,000 192,000 Asset revaluation surplus Retained earnings Total equity Loan to Cherry Ltd 10,000 36,000 330,000 336,000 1,610,000 1,164,000 0 10,000 Deferred tax liability (DTL) 104,000 60,000 Total liabilities 104,000 70,000 Total equity and liabilities 1,714,000 1,234,000 Cash 150,000 156,000 Accounts receivable 20,000 580,000 Loan receivable from Blossom Ltd 10,000 0 Inventories 336,000 72,000 Land 140,000 240,000 Equipment 134,000 192,000 Accumulated depreciation equipment -20,000 -26,000 Goodwill 0 20,000 Shares in Blossom Ltd 944,000 0 Total assets 1,714,000 1,234,000 Page 2 of 2 387 words 呕 Focus

Answer rating: 100% (QA)

Answer 1 consolidation journal entries Consolidation Journal Entries Cherry Ltd Blossom Ltd Eliminations Consolidated 1 Sales Revenue Elimination 10000 0 10000 0 2 Interest Revenue Elimination 1000 ... View the full answer