Tien Ltd acquíred 80°Zo of Chai Ltd on 1 July 2010. At the dü9″ •'”on date, th* ° 9•ity of Chat Ltd was:
| Shane capital ( 100,000 shares} | |
| Genera) reserva | lODO |
| Retained eamings | 37,000 |
All the identifiable nei assets of Char Ltd were recorded ai fair value at the date of act uisitiun, except for the following asxets:
| C’or/ yfng omouri/ | tair o/ue | |
| Plnni (cost $75,000) | 50,000 | 55,000 |
| Land | 30,000 |
The plant has a further 10 year life, with benefits expected to be received evenly over that period. The land was sold on 1 February 2OH for $40,000. Any valuation reserve in relation to the land
its transferred to retained earnings on consolidation.
Three years afier acquisition, the Financial infurmatinn at 30 lime 2Ol2 of the two
cumpxksappeamasfoMows:
T1ea Ltd Cbai Ltd
Salex
Older rerenre.
Debenture interest
Management and consulting feex
316,000
5,000
5.ooo
220,000 Dividends from Chai Ltd 12,000 Total revenue Cust of salex
Manufacturing expenses Depreciation on plant Administrative expenses Financial expenses
33g,ooo
130,000
90,000
15.000 l5;000 11,000
220,000
85,000
60,000
15,000
a,o0o
5,000 Other expenses
Total expen
ses Profit befisre iax lBCOrfie fax ex§enSe
14,000
275.000
63.000
{23,000)
12,000
185,000
35,000
o›,onn ›
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Operaiing
profit a fier tax
35,000
l 5,000
Additional information.
Tien Ltd user the full goodwill method. The fair value of non ccntrolling
interest at 1 July 2010 was $31,500.
- The inventory on hand of Chai Lid on 1 July 2012 included a quantity priced at
$10,000 that wax transferred from Tien Ltd during the prior financial year. This inventory had cu.st Tien Ltd 57,500. Tbis entire inventory was scl¢l by Chai LM to partie* external to tile group during the current financial year.
- Chai Lld sold inventory to Tien Ltd for $60,000 during the year. This inventory had an original cost In Chai Ltd of $55,000. This entire inventory was held by Tien Ltd during the year.
- On 1 January 20 12, Char Ltd sold an item frum its inventury tn Tien Ltd for
$20,000. Tien Ltd had treated this item as an addition to its plant. The item was put into service as soon as received by Tien Ltd and depreciation charged at 20% p.a. The cost of that item to Chai Ltd wax $1 5,000.
- The management and consulting fees of Tien Ltd were all paid by Chai Ltd and
represented charges made for administration $2,200 and technical services
$2,800. The fatter were recognised as manufacturing expx by Char Ltd.
All debentures issued by Chai Ltd are held by Tien Ltd. The related interest has been recorded by Tien Ltd accordingly and Chai Ltd recorded the interest paid in financial expenses.
- Other eomponents of oquity relate to rnovements in the faiT YälueS of the r.«aiicia) assets. Tbe bàiaoce uf thèse arcounts On 1 July 2012 was $10,000 for Tien Ltd and $8,000 for Chai Ltd.
- The tax rate is 30%.
- Prep * •” 9*’• itiun afialysis and the consolidation journal entries necessary for preparation of the ‹x›nxolidated financial statements for the year ending 30 June 2013 fur the group comprising Tien Ltd and Char Ltd.
- Complete a detailed consolidation woràsheet for the year ending 30 June 2013.
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