View the step-by-step solution to:

On 1 July 2015, Tuna Ltd acquired all the issued shares of Brim Ltd. Tuna Ltd paid $30 000 in cash and 20 000 shares in Tuna Ltd valued at $3 per...


 

On 1 July 2015, Tuna Ltd acquired all the issued shares of Brim Ltd. Tuna Ltd paid $30 000 in cash and 20 000 shares in Tuna Ltd valued at $3 per share. At this date, the equity of Brim Ltd consisted of $66 000 share capital and $6000 retained earnings.

  At 1 July 2015, all the identifiable assets and liabilities of Brim Ltd were recorded at amounts equal to their fair values except for:

 

Carrying amount

        Fair value

Plant (cost $150 000)

$120 000

$123 000

Patents

90 000

105 000

Inventory

18 000

22 500

 

The plant was considered to have a further 5-year life. The patents were sold for $120 000 to

an external entity on 18 August 2015. The inventory was all sold by 30 June 2016.

Additional information

(a)  Tuna Ltd sells certain raw materials to Brim Ltd to be used in its manufacturing process.

      At 1 July 2016, Brim Ltd held inventory sold to it by Tuna Ltd in the previous year at a profit of $600. During the 2016-17-year, Tuna Ltd sold inventory to Brim Ltd for $21 000. None of this was on hand at 30 June 2017.

(b)  Brim Ltd also sells items of inventory to Tuna Ltd. During the 2016-17 year, Brim Ltd sold goods to Tuna Ltd for $4500. At 30 June 2017, inventory which had been sold to Tuna Ltd at a profit of $300 was still on hand in Tuna Ltd.'s inventory.

(c)  On 1 July 2016, Brim Ltd sold an item of plant to Tuna Ltd for $15 000. This plant had a

      carrying amount in the records of Brim Ltd of $14 000 at time of sale. This type of plant is

      depreciated at 10% p.a. on cost.

(d)  On 1 January 2015, Tuna Ltd sold an item of inventory to Brim Ltd for $18 000. The

      inventory had cost Tuna Ltd $16 000. This item was classified by Brim Ltd as plant. Plant of this type is depreciated by Brim Ltd at 20% p.a.

(e)  On 1 March 2017, Brim Ltd sold an item of plant to Tuna Ltd. Whereas Brim Ltd classified this as plant, Tuna Ltd classified it as inventory. The sales price was $9000 which included a profit to Brim Ltd of $1500. Tuna Ltd sold this to another entity on 31 March for $9900.

(f)   The tax rate is 30%.

 

At 30 June 2017, the following financial information was provided by the two companies:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuna Ltd

Brim Ltd

Dr

Cr

Dr

Cr

Sales revenue

64 500

78 000

Cost of sales

30 900

46 350

Trading expenses

4 800

9 000

Office expenses

7 950

4 050

Depreciation expenses

1 800

3 900

Proceeds on sale of plant

9 000

15 000

Carrying amount of plant sold

7 500

14 000

Income tax expense

11 100

7 300

Share capital

96 000

66 000

Retained earnings (1/7/16)

48 000

31 500

Current liabilities

21 100

10 500

Deferred tax liability

11 000

15 000

Plant

57 000

107 250

Accumulated depreciation - plant

18 300

33 450

Intangibles

12 000

11 100

Deferred tax assets

8 100

9 450

Shares in Brim Ltd

90 000

0

Inventory

28 500

24 600

Receivables

8 250

12 450

267 900

267 900

249 450

249 450


Required

  Prepare a consolidated set of financial statements for the group. Use the worksheet provided. (10 marks)

        

 

Worksheet for requirement,

 

 

Tuna

Ltd

Brim

Ltd

Journal number

Adjustments

Journal  

Group

Dr

Cr

number

Sales revenue

64 500

78 000


 

 

 

 

Cost of sales

30 900

46 350

 

 

 

 

Gross profit

33 600

31 650

 

 

 

Trading expenses

4 800

9 000

 

 

 

Office expenses

7 950

4 050

 

 

 

Depreciation

1 800

3 900

 

 


 

 

14 550

16 950

 

 

 

Profit from trading

19 050

14 700

 

 

 

Proceeds from sale of plant

9 000

15 000


 

 

 

Carrying amount of plant sold

7 500

14 000

 

 


 

Gain/loss on sale of machinery

1 500

1 000

 

 

 

Profit before tax

20 550

15 700

 

 

 

Tax expense

11 100

7 300

 

 

 

Profit

9 450

8 400

 

 

 

Retained earnings (1/7/16)

48 000

31 500

 

 

 

Retained earnings (30/6/17)

57 450

39 900

 

 

 

Share capital

96 000

66 000

 

 

 

BCVR

--

--

 

 


 

Total equity

153 450

105 900

 

 

 

 

 

 

 

 

 

Current liabilities

21 100

10 500

 

 

 

Deferred tax liability

11 000

15 000

 

 

 

 Total liabilities

32 100

25 500

 

 

 

Total equity and liabilities

185 550

131 400

 

 

 

 

 

 

 

 

 


 

 

 

Dr

Cr

 

Plant

57 000

107 250

 

 

 

Accumulated depreciation

(18 300)

(33 450)

 

 

 

Intangibles

12 000

11 100

 

 

 

Shares in Brim Ltd

90 000

-

 

 

 

Deferred tax asset

8 100

9 450

 

 

 

Inventory

28 500

24 600

 

 

 

Receivables

8 250

12 450

 

 

 

Goodwill

0

0

 

 

 

Total assets

185 550

131 400

 

 

 

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question