Topic_8_Tutorials.pptx - MAA716 Financial Accounting Topic 8 Chapter 25 Tutorials Consolidation Accounting for Group Structures Question 25.23 Biggin

Topic_8_Tutorials.pptx - MAA716 Financial Accounting Topic...

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MAA716 Financial Accounting Topic 8 – Chapter 25 Tutorials Consolidation - Accounting for Group Structures
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Question 25.23Biggin Ltd acquires 100 per cent of the shares of Smallin Ltd on 1 July 2018 for a consideration of $730 000. The share capital and reserves of Smallin Ltd at the date of acquisition are:Share capital$200 000Retained earnings $100 000Revaluation surplus$150 000$450 000There are no transactions between the entities and all assets are fairly valued at the date of acquisition. The financial statements of Biggin Ltd and Smallin Ltd at 30 June 2019 (one year after acquisition) are (next slide):REQUIRED:Prepare the consolidated financial statements for Biggin Ltd and Smallin Ltd as at 30 June 2019.
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Biggin Ltd($000) Smallin Ltd($000) Reconciliation of opening and closing retained earnings Profit before tax 300 100 Tax (100) (30) Profit after tax 200 70 Retained earnings—1 July 2018 200 100 Retained earnings—30 June 2019 400 170 Statements of financial positions Shareholders’ equity: Retained earnings 400 170 Share capital 1 000 200 Revaluation surplus 300 200 Current liabilities: Accounts payable60 40 Non-current liabilities: Loans 600 250 T. L. & S.E 2 360 860 Current assets: Cash80 45 Accounts receivable 350 95 Non-current assets: Land 200 120 Plant 1 000 600 Investment in Smallin Ltd 730 ---- Total Assets 2 360 860
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Solution to Question 25.23 Next slides
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Biggin Ltd Smallin Ltd Elimination and adjustments Consolidated statement Dr Cr $000 $000 $000 $000 $000 Statement of profit or loss and other comprehensive income together with reconciliation of opening and closing retained earnings Profit before tax 300 100 400 Tax (100) (30) (130) Profit after tax 200 70 270 Retained earnings at 1 July 2018 200 100 100 1 200 Statement of financial position Shareholders’ equity Retained earnings at 30 June 2019 400 170 470 Share capital 1 000 200 200 1 1 000 Revaluation surplus 300 200 150 1 350 Current liabilities Accounts payable 60 40 100 Non-current liabilities Loans 600 250 850 2 360 860 2 770 Current assets Cash 80 45 125 Accounts receivable 350 95 445 Non-current assets Land 200 120 320 Plant 1 000 600 1 600 Investment in Smallin Ltd 730 730 1 Goodwill 280 1 280 2 360 860 730 730 2 770
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