On 1 July 2013 Donald Ltd acquired all of the share capital (cum div) of Duck Limited for a consideration of $500,000 cash and a brand that was held
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On 1 July 2013 Donald Ltd acquired all of the share capital (cum div) of Duck Limited for a consideration of

$500,000 cash and a brand that was held in their accounts at a book value of $10,000 but at 1 July 2013 had a fair value of $34,000. Duck Ltd reported a dividend payable of $10,000 at 1 July 2013. 

 

At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: 

 

ASSET BOOK VALUE MARKET VALUE

Inventory $10,000 $14000

Land $25,000 $30,000

Plant $20,000 

Less depreciation  (3,000)  

$17,000 $22,000

Accounts Receivable $16,000 $14,000 

 

The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $14,000. The land was sold on 30/12/16 for $32,000. The plant was on hand still at 30/6/17. 

 

At the date of acquisition the equity of Duck Ltd consisted of: 

 

 

Share Capital       380,000 

General Reserve       70,000 

Retained Earnings      62,000  

 

 

Information from the trial balances of Donald Ltd and Duck Ltd at 30 June 2017 is presented overleaf on page 3. 

 

Additional Information

1. On 1 Jan 2017 Duck Ltd sold inventory to Donald Ltd costing $60,000 for $80,000. Half of this inventory was sold to outside parties for $30,000 by 30/6/17.

2. On 1 Jan 2016 Duck Ltd sold inventory costing $9000 to Donald Ltd for $12,000. Donald Ltd treats the item as equipment and depreciates it at 10% per annum.

3. On 1 July 2016 Duck sold plant to Donald for $12,000. The plant had cost Duck $10,000 on 1 July 2014 and it was being depreciated at 10% per annum. Donald regards the plant as inventory. The inventory was all sold by 30th July 2016.

4. At 1 July 2016 Duck Ltd held inventory that it had purchased from Donald Ltd on 1 June 2016 at a profit of $7000. All inventory was sold by 30 June 2017.

5. Donald Ltd accrues dividends from Duck Ltd once they are declared.

6. Donald Ltd has earned $1200 in interest revenue in the 2017 financial year from Duck Ltd.

7. Donald Ltd has earned $4800 in service revenue in the 2017 financial year from Duck Ltd. 8. Assume a tax rate of 30%. 


REQUIRED:


A. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2017.

B. Prepare the consolidated statement of profit or loss and other comprehensive income, the consolidated balance sheet and the consolidated statement of changes in equity for the period ended 30 June 2017.


Donald Ltd Duck Ltd

DR CR DR CR

Sales Revenue 1,192,500     932,500       

Cost of Sales 888,000      676,000      

Wages and Salaries 61,000       32,000       

Depreciation Expense 5,200        4,800        

Service Expense 3,500        4,800       

Interest Expense 7,000        1,200       

Other Expenses 4,000        6,000        

Gain on Sale of Non Current Assets           / 7,000        

Service Revenue 4,800         5,000         

Interest Revenue 1,200         7,000         

Dividend Revenue 16,000                   /

Income tax expense 97,120       118,480      

Retained Earnings 1/7/16 100,820       70,280        

Dividend Paid 10,000       7,000        

Dividend Declared 12,000       9,000        

Share Capital 500,000       380,000       

General Reserve 146,000       70,000        

Other Equity 1/7/16 4,000         12,000        

Gains on Financial Assets (OCI) 1,000         6,000         

Loan Payable to Donald Ltd            / 16,000        

Deferred Tax Liability 52,000        30,000        

Dividend Payable 12,000        9,000         

Shares in Duck Ltd 524,000                /

Cash 86,000       147,500      

Inventories 169,500      36,000       

Other Current Assets 11,000       300,000      

Dividend Receivable 9,000                  /

Loan receivable from Duck Ltd 16,000                 /

Financial Assets 15,000       68,000       

Plant and Equipment 52,000       28,000       

Acc. Depreciation Plant 10,000        14,000        

Land 70,000       120,000      

2,040,320    2,040,320     1,558,780   1,558,780      

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