Consolidated Financial Statements with Non-Controlling Interests

Corporate Accounting Systems

Consolidated Financial Statements with Non-Controlling Interests

Assignment –spring 2013

INSTRUCTIONS

1. The assignment is to be submitted as an individual attempt. It must be prepared using Excelspreadsheet and be entirely your own work from this semester – i.e. do not use or copy any file, in whole or in part, from any previous semester or from any other student.Create a NEW EXCEL FILEfor this assignment and use your student number as the file name.

2. Marking guidecan be found as the last page of this assignment question file.Print this page and complete. Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well have met the expected standards (performance levels) for the criteria identified.

3. After handing in the printed copy, the excel file must be uploaded to vUWS using TURNITIN.Further instructions on this process will be provided on vUWS closer to the due date. The excel file MUST EXACTLY MATCH the printed version and not be modified after the submitted version was printed. Uploading a file that doesn’t match exactly, or failing to upload the excel file on time,will result in a significant penalty!The file will be checked against other students’ submissions for potentialplagiarism.

4. Marks will be deducted for poor quality presentation, for incorrect work, and for missing work. The presentation of the financial statements must the format of the examples and end-of-chapter exercise in chapter 29 of the textbook.

QUESTION

Using the information below and the financial statementson the following page, prepare the following at 30 June 2013:

A. adjustment/elimination journal entries for consolidation (10 marks); and

B. consolidation worksheetand detailed calculation of non-controlling interest balance (5 marks); and

C. consolidated financial statements and statements of changes in equity of Platypus Limited and its controlled entities (5 marks).

INFORMATION

1. On 1 January 2007 Platypus Ltd purchased 100% of the issued capital of Emu Ltd for $650,000 cash. On acquisition Emu Ltd accounts showed: Share capital $700,000 and Retained earnings $159,000. All assets and liabilities were recorded at fair value except for land that was undervalued by $80,000.

2. On 1 July 2008Platypus Ltd and Emu Ltd each acquired 35% of the issued capital of Koala Ltd for a combined total of $400,000 cash. The balance sheet of Koala Ltd at the acquisition date showed: Share capital $250,000 and Retained earnings $56,000. All assets and liabilities were recorded at fair value except foran item of plant that was undervalued by $30,000. At that time the plant had a remaining life of 6 years and accumulated depreciation of $24,000. The plant was still on hand at 30 June 2013.

For the year ended 30 June 2013:

3. On 1 July 2012Koala Ltd sold an item of plant to Emu Ltd for $72,750 when its carrying value in Koala’s books was $69,000 (original cost $110,400 and original estimated life of 12 years).

4. The opening inventory on 1 July 2012 in Platypus Ltd included stock of $29,000 acquired from Emu Ltd.

5. During the year Emu Ltd made sales of inventory to Koala Ltd of $116,000, while Koala Ltd sold $184,000 of inventory to Platypus Ltd.

6. Closing inventories on 30 June 2013 included the following: Platypus Ltd $55,000 (bought from Koala Ltd) and Koala Ltd $28,000 (bought from Emu Ltd).

7. Platypus Ltd charged management fees to both Emu Ltd and Koala Ltd. Emu Ltd also charged management fees to Koala Ltd.

8. Dividends were declared/paid by the three companies.

AT 30 JUNE 2013	PLATYPUS LTD	EMU LTD	KOALA LTD
	$	$	$
INCOME STATEMENTS
Sales revenue	1,413,500	978,300	777,100
Cost of goods sold	798,000	538,060	427,400
Gross profit	615,500	440,240	349,700
Other income
Management fee revenue	22,600	21,000	-
Dividend revenue	222,750	36,750	-
Gain on sale of plant	-	-	3,750
Expenses
Depreciation expense	(126,200)	(49,000)	(93,700)
Management fee expense	-	(12,600)	(31,000)
Other expenses	(326,100)	(263,800)	(221,400)
Profit before tax	408,550	172,590	7,350
Income tax expense	(127,200)	(50,050)	(2,400)
Profit for the year after tax	281,350	122,540	4,950
Retained earnings at start of year	659,100	434,000	243,900
Dividend paid/declared	(250,000)	(186,000)	(105,000)
Retained earnings at year end	690,450	370,540	143,850
BALANCE SHEETS
Equity
Share capital	850,000	700,000	250,000
Retained earnings	690,450	370,540	143,850
Current Liabilities
Accounts payable	184,000	71,010	114,750
Income tax payable	125,900	66,700	2,600
Dividends payable	125,000	50,000	55,000
Provision for employee benefits	19,200	15,700	12,900
Non-Current Liabilities
Loans	675,100	175,100	645,000
Provision for employee benefits	21,900	19,400	14,100
Deferred tax liability	6,900	9,700	-
	2,698,450	1,478,150	1,238,200
Current Assets
Accounts receivable	276,300	104,100	110,800
Allowance for doubtful debts	(15,500)	(7,000)	(4,200)
Dividends receivable	69,250	19,250	-
Inventory	112,100	144,200	75,900
Non-Current Assets
Land and buildings	800,000	610,800	652,000
Plant – at cost	901,200	601,200	699,600
Accumulated depreciation – plant	(294,900)	(194,400)	(297,600)
Deferred tax asset	-	-	1,700
Investment in Emu Ltd	650,000	-	-
Investment in Koala Ltd	200,000	200,000	-
	2,698,450	1,478,150	1,238,200

9. Non-controlling interests to be recognised.

10. Platypus Ltd has the following accounting policies which have been in place for the groupfor many years: (i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of the subsidiary; (ii) Non-controlling interest is measured at fair value; (iii) Intragroup sales of inventory to be at a markup of 25% on cost; (iv) Plant is depreciated straight-line over its estimated life, with no residual value; and (v) all amounts to be recorded to the nearest whole dollar.

11. The company tax rate is currently 30% and it has been this rate for many years.

NOTE:

· You MUST number journal entries as they relate to the point numbers given in the information below. Where more than one journal is needed, add the letters a,b,c,…etc to them. That is, if two journals are required to record the acquisition detailed in information point 1, then the first journal will be 1a and the second is 1b. Short narrations are expected for each journal entry.

· The consolidated statements required for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Notes to the statements are not required.

· You may “cut and paste” the financial information on the next page into your excel file, but no other information is to be copied into your file.

Plagiarism, Cheating & Collusion

Plagiarism, cheating or collusion is regarded as a serious breach of the University's academic standards. Students must carefully read the Academic Rules on Plagiarism, Cheating & Collusion. Refer to the School of Accounting Handbook for further details

RULES WILL BE STRICTLY ENFORCED



200109CORPORATE ACCOUNTING SYSTEMS ASSIGNMENT MARKING CRITERIA & STANDARDS – SPRING 2013

CRITERIA	UNSATISFACTORY	BELOW EXPECTATIONS	MEETS MINIMUM EXPECTATIONS FOR A PASS	EXCEEDS MINIMUM EXPECTATIONS	SIGNIFICANTLY EXCEEDS EXPECTATIONS
A. Journal entries:
Correctness/completeness of journals	Four or moreevents not correctly recorded and/or missing and/or included incorrectly □0marks	Three events not correctly recorded and/or missing and/or included incorrectly □3marks	Two events not correctly recorded and/or missing and/or included incorrectly □5marks	One event not correctly recorded and/or missing and/or included incorrectly □7marks	Every required journal is correct, with none missing or included incorrectly □9marks
Presentation, numbering and narrations	Three or more journals are not presented clearly and/or not complete and/or not numbered correctly □ 0marks		One or two journals not presented clearly and/or not complete and/or not numbered correctly □ ½mark		All journals are presented clearly and numbered correctly. All narrations are complete and informative □1mark
B. Consolidation Worksheet and Non-Controlling Interest Calculation:
Consolidation Worksheet	Poor presentation and/or not balanced due toerrors and/or missing entries □ 0marks		Not clearly presented but does balance. □1mark		Clearly presented. No errors and/or missing entries □2marks
Non-Controlling Interest Summary Calculation	Three or more errors and/or not reconciled to the Balance Sheet □ 0 marks	Two errors but is reconciled to the Balance Sheet □1mark	One error but is reconciled to the Balance Sheet □2marks		Information is presented well, no errors and reconciled to the Balance Sheet □3marks
C. Consolidated Financial Statements
Presentation of Comprehensive Income Statements & Balance Sheets (for both Group and Parent)	Poor presentation and/or more than three errors and/or missing headings or amounts □ 0marks	Not acceptably presented and/or three errors and/or missing headings or amounts □½mark	Acceptably presented, but with two errors and/or missing headings or amounts □1½marks	Acceptably presented, but with one error and/or missing heading or amount □2marks	Correctly presented. No errors and/or missing headings or amounts □3marks
Statements of Changes in Equity (for both Group and Parent)	One or more errors and/or not reconciled to the Balance Sheet □ 0 marks		Information could be presented more clearly but is reconciled to the Balance Sheet □1mark		Information is clearly presented and reconciled to the Balance Sheet □2marks
STUDENT ID: STUDENT NAME: TOTAL MARK: / 20

[NOTE: Errors flowing from earlier incorrect journals, etc will not be treated as further errors]

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