Statement of finance accounting
Statement of finance accounting is a family-run book publisher that has purposely refrained from using high-technology equipment over the past five years as the directors (the G family) considered it to be a ‘fad’ and a waste of the company’s resources. As a result, the company’s antiquated equipment has failed to produce quality material and has been
very inefficient compared with GyK’s competitors. During the current year, the company’s bankers took possession of the company’s assets, converted all the debt Page | 5 into equity and two directors of the bank were appointed to GyK’s board, which now
totals four people. The bank is undecided whether it shou
ld sell the company’s assets, which have little recoverable value, or reject further equity into the company, purchase more advanced equipment and attempt to trade on and sell the business as a going concern.
- ACT502 Ltd is a 30 per cent shareholder of Investment Co. Pty Ltd. The other shareholders have smaller shareholdings (approximately 8 to 12 per cent) and are always too busy to attend annual general meetings. ACT502 has two non-executive seats on the board and the remaining three are held by other shareholders – one chief executive officer who is a shareholder and two non-executives –who do make an attempt to attend board meetings
- S Ltd is owned 50 per cent by B1 Ltd and 50 per cent by B2 Ltd (the founding shareholders). Each has two seats on the board, with no party having a casting vote, although B1 Ltd appoints the managing director. Profits are split 50-50 after the provision of the managing director’s salary. B2 Ltd has agreed that it will pay a management fee to B1 Ltd, equivalent to 50 per cent of the results for the year, in the event of a loss. B1 Ltd is a holder of 10 options, which are exercisable at any time at a 10 per cent discount to the fair value of the shares as at the exercise date.
- Boost Juice Ltd is a 51 per cent shareholder in Chatime Tea Ltd and currently has
two out of five board seats. Trampoline Ltd holds the remaining 49 per cent shares and currently has the other three seats. Boost Juice Ltd is a passive shareholder as it is happy with the way Trampoline Ltd has been running the company.
- P Ltd, G Ltd and H Ltd are each 33.33 per cent shareholders of PGH Pty Ltd, a small proprietary company that is involved in the music industry. P Ltd and H Ltd are passive shareholders with the one board seat each out of a total of three. G Ltd has one board seat and is also involved in the day-to-day running of the business.
- ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
Assignment
Question 5 (Marks 50)
ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30 June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was as follows:
| Statement of financial position TakeItEasy Ltd as at 30 June 2018 | Page | 6 | |||||
| $(‘000) | $(‘000) | |||||
| Assets | Liabilities | |||||
| Accounts receivable | 70 | Loan | 300 | |||
| Inventory | 100 | |||||
| Land | 400 | Shareholders’ equity | ||||
| Property, plant and equip | 700 | Share Capital | 500 | |||
| Accumulated depreciation | (270) | Retained Earnings | 200 | |||
| 1,000 | 1,000 | |||||
Additional Information:
Tax rate is 30 per cent
As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000. TakeItEasy Ltd adopts the cost model for measuring its property, plant and equipment. The property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value.
One year following acquisition it was considered that TakeItEasy Ltd’s goodwill had a recoverable amount of $60 000.
TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends being paid from pre-acquisition retained earnings.
ACT 503 Corporate Accounting
Due Date: 11.59 pm Friday 29th September in Study Week 10
Assignment
The statements of financial position and statements of comprehensive income of
ChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows:
Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019
| ChallengeMe Pty Ltd | TakeItEasy Ltd | ||||
| Page | 7 | |||||
| ($000) | ($000) | ||||
| Assets | |||||
| Cash | 80 | 40 | |||
| Accounts receivable | 50 | 50 | |||
| Inventory | 140 | 123 | |||
| Land | 600 | 400 | |||
| Property Plant and equipment | 900 | 700 | |||
| Accumulated depreciation | (300) | (313) | |||
| Investment in Beach Ltd | 900 | – | |||
| Total non-current assets | 2,370 | 1,000 | |||
| Liabilities | |||||
| Accounts payable | 100 | 10 | |||
| Dividends payable | 100 | 50 | |||
| Loan | 670 | 140 | |||
| Shareholders’ equity | |||||
| Share capital | 1,000 | 500 | |||
| Retained earnings | 500 | 300 | |||
| Total shareholders’ equity | 2,370 | 1,000 | |||
| Reconciliation of opening and closing retained earnings | |||||
| Profit after tax | 400 | 190 | |||
| Retained earnings — 30 June 2018 | 300 | 200 | |||
| Interim dividend | (90) | (40) | |||
| Final dividend | (110) | (50) | |||
| Retained earnings — 30 June 2019 | 500 | 300 | |||
Required:
Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June 2019 with the following:
Acquisition analysis show relevant calculations All relevant worksheet journal entries
- Fair Value of assets adjustment
- Pre-acquisition eliminating entries
Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for the period ending 30 June 2019 showing columns of Eliminations and adjustments and consolidated amounts
Consolidated statement of financial position of ChallengeMe Group.
| Hard work pays off. Good Luck | |
| ACT 503 Corporate Accounting | Assignment |
