ACC 567 - 3 - Assignments. PDF

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FINANCIAL ACCOUNTING II ACC 567 Monday 1.30-4.30PM

Sameera Jayaweera 11621166

QUESTION 1 [1] STEP 1 : PREPARE ACQUISITION ANALYSIS AS AT 1ST JULY 2016 $ 240,000 50,000

Cost of Acquisition NCI

$

290,000 FVINA Share Capital General Reserves Retain Earnings

160,000 10,000 59,000

BCVR 2 ,800 6 ,300 11,9 00

Inventories [14,000 -10,000]x[1-0.3] Plant [99,000 -90,000]x[1-0.3] Land [87,000 -70,000]x[1-0.3] Goodwill on acquisition

(250,000 ) 40,000

21,000

STEP 2 : PREPARE BUSINESS COMBINATION VALUATION RESERVES (BCVR) ENTRIES 

Inventories Date 1-Jul 16

Account Inventory Differed Tax Liability (DTL) [4,000*30%] Business Combination Valuation Reserves (BCVR) (Record gain on revaluation at acquisition date)

Dr ($) 4,000

Cr ($) 1,200 2,800

 Plant Date 1-Jul 16

Account Accumulated Depreciation - Plant Plant (Write Down plant to its carrying amount) 1-Jul 16

Plant Differed Tax Liability (DTL) [9,000*30%] Business Combination Valuation Reserves (BCVR) (Record gain on revaluation at acquisition date) 

Dr ($) 130,000

Cr ($) 130,000

9,000 2,700 6,300

Land

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Date 1-Jul 16

Account Land Differed Tax Liability (DTL) [4,000*30%] Business Combination Valuation Reserves (BCVR) (Record recognised contingent liability at acquisition date)

Dr ($) 17,000

Cr ($) 5,100 11,900

STEP 3 : PREPARE PRE-ACQUISITION ENTRIES Date 1-Jul 16

Account Share Capital [160,000 x 0.8] General Reserves [10,000 x 0.8] Retained Earnings [59,000 x 0.8] Business Combination Valuation Reserves (BCVR) [2,800+6,300+11,900] x [0.8] Goodwill Shares in Sunshine Ltd (Record pre-acquisition elimination entries at 1st of July 2016)

Dr ($) 128,000 8,000 47,200 16,800

Cr ($)

40,000 240,000

STEP 4 : No Entries STEP 5 : PREPARE NON-CONTROLLING INTEREST(NCI) ENTRIES  STEP (A) : NCI share of equity of Sunshine Ltd at acquisition date Date 1-Jul 16

Account Share Capital [160,000 x 0.2] General Reserves [10,000 x 0.2] Retained Earnings [59,000 x 0.2] Business Combination Valuation Reserves (BCVR) [2,800+6,300+11,900] x [0.2] NCI (Record NCI share equity of Sunshine Ltd at acquisition date)

Dr ($) 32,000 2,000 11,800 4,200

Cr ($)

50,000

STEP (B) : No Entries STEP (C) : No Entries

[2]

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STEP 2 : PREPARE BUSINESS COMBINATION VALUATION RESERVES (BCVR) ENTRIES  Inventory – Date 30-Jun 18

Account Cost of Goods Sold Income Tax Expense (ITE) [2,000*30%] Retained Earnings /Transfer from BCVR (Record reversal of gain on inventory)

Dr ($) 2,000

Cr ($) 600 1,400

 Plant Date 30-Jun 18

Account Accumulated Depreciation - Plant Plant (Write Down plant to its carrying amount) 30-Jun 18 Plant Differed Tax Liability (DTL) [9,000*30%] Business Combination Valuation Reserves (BCVR)

Dr ($) 130,000

Cr ($) 130,000

9,000 2,700 6,300

(Record gain on revaluation at acquisition date) 30-Jun 18

Depreciation Expense – Plant [9000/3] 3,000 Retained Earnings (1/7/17) 3,000 Accumulated Depreciation – Plant [3000*2] (Record the depreciation of plant for the year ended 2016/17 and 2017/18) 30-Jun 18 Deferred Tax Liability (DTL) [3000*30%*2] 1,800 Income Tax Expense (ITE) [3000*30%] Retained Earnings (1/7/17) (Record Tax impact on depreciation) 

6,000

900 900

Land Date 30-Jun 18

Account Land Differed Tax Liability (DTL) [4,000*30%] Business Combination Valuation Reserves (BCVR) (Record recognised contingent liability at acquisition date)

Dr ($) 17,000

Cr ($) 5,100 11,900

STEP 3 : PREPARE PRE-ACQUISITION ENTRIES

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Date 30-Jun 18

Account Dr ($) Cr ($) Share Capital [160,000 x 0.8] 128,000 General Reserves [10,000 x 0.8] 8,000 Retained Earnings [59,000+ 1,400] x [0.8] 48,320 Business Combination Valuation Reserves (BCVR) 15,680 [2,800+6,300+11,900-1,400] x [0.8] Goodwill 40,000 Shares in Sunshine Ltd 240,000 (Record pre-acquisition elimination entries at 1st of July 2016) 30-Jun 18 Retained Earnings / Transfer From BCVR[1400 x 0.8] 1,120 Business Combination Valuation Reserves (BCVR) 1,120 (Record additional elimination entry for the sale of inventory at 30th June year ended 2018)

STEP 4 : PREPARE INTRA-GROUP ADJUSTING ENTRIES Date 30-Jun 18

Account Dr ($) Retained Earnings (1/7/17) 4,000 Final Dividend Paid [5000 x 0.8] (Adjust intragroup dividend for the period of 2016/17) 30-Jun 18 NCI [5000 x 0.2] 1,000 Final Dividend Paid (Adjust for NCI share of intragroup dividend for the period of 2016/17) 30-Jun 18 Dividend Revenue [10000 x 0.8] 8,000 Final Dividend Declared (Adjust intragroup dividend for the period of 2017/18) 30-Jun 18 Dividend Payable [10000 x 0.8] 8,000 Dividend Receivable (Adjust for intragroup dividend for the period of 2017/18) 30-Jun 18 NCI [10,000 x0.2] 2,000 Final Dividend Declared (Adjust for NCI share of intragroup dividend for the period of 2017/18)

Cr ($) 4,000

1,000

8,000

8,000

2,000

STEP 5 : PREPARE NON-CONTROLLING INTEREST(NCI) ENTRIES  STEP (A) : NCI share of equity of Sunshine Ltd at acquisition date Date 30-Jun 18

Account Share Capital [160,000 x 0.2] General Reserves [10,000 x 0.2] Retained Earnings [59,000 x 0.2] Business Combination Valuation Reserves (BCVR) [2,800+6,300+11,900] x [0.2] NCI (Record NCI share equity of Sunshine Ltd at acquisition date)

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Dr ($) 32,000 2,000 11,800 4,200

Cr ($)

50,000

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 STEP (B) : NCI share of change in equity of Sunshine Ltd from 1-July 16 till 30-June 17 

Share Capital -No Entries



General Reserves – No Entries



Retained Earnings – Date 30-Jun 18

Account Dr ($) Retained Earnings (1/7/17) 1,580 NCI (Record NCI portion of change in retained earnings for the year of 2016/17)



Cr ($) 1,580

BCVR Date 30-Jun 18

Account NCI Business Combination Valuation Reserves (BCVR) (Record NCI portion of decrease in BCVR for the year of 2016/17)

Dr ($) 280

Cr ($) 280

 STEP (C) : NCI share of change in equity of Sunshine Ltd from 1-July 17 till 30-June 18 

Share Capital -No Entries



General Reserves – No Entries



Retained Earnings – Date 30-Jun 18

Account Dr ($) NCI Share of Profit & Loss 3,300 NCI (Record NCI portion of change in retained earnings for the year of 2017/18)



Cr ($) 3,300

BCVR Date 30-Jun 18

Account Transfer from BCVR/Retained Earnings [1400 x 0.2] Business Combination Valuation Reserves (BCVR) (Record NCI portion of decrease in BCVR for the year of 2017/18)

Dr ($) 280

Cr ($) 280

WORKINGS

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STEP 5 : PREPARE NON-CONTROLLING INTEREST(NCI) ENTRIES  STEP (B) : NCI share of change in equity of Sunshine Ltd from 1-July 16 till 30-June 17



BCVR

(-)Sale of half of Inventory at 30th June 2017 Change of BCVR for the year of 2016/17

(1,400) $(1,400)

NCI percentage of decrease of BCVR for the year of 2016/17 = 1,400 x 20% = $280



Retained Earnings

Retained Earnings at 1st of July 2016 (+)Profit for the year ended 30th June 2017 (-)Divided paid (-)Transfer from General Reserves (-)Transfer from General Reserves Retained Earnings at 30th June 2017

59,000 15,000 (5,000) -gg $69,000

Therefore, the change of retained earnings between 2016/17 is $10,000 (69,000 -59,000). So, Change of retained earnings between 2016/17 (-) Depreciation Expense – Plant 2016/17 (+)ITE impact for depreciation Adjusted Profit

10,000 (3,000) 900 $7,900

NCI Percentage of change of retained earnings for the year of 2016/17 = 7,900 x 20% = $1,580

 STEP (C) : NCI share of change in equity of Sunshine Ltd from 1-July 17 till 30-June 18 

BCVR

(-)Sale of half of Inventory at 30th June 2018 Change of BCVR for the year of 2017/18

(1,400) $(1,400)

NCI percentage of decrease of BCVR for the year of 2017/18 = 1,400 x 20% = $280 

Retained Earnings

(+) Profit for the year ended 30th June 2018 (-) Cost of Goods Sold (COGS) (+)Income Tax Expense (ITE) - Inventory (-)Depreciation expense for the year of 2017/18 (+)Tax Impact of depreciation expense for the year of 2017/18 Change of profit and loss for the year of 2017/18

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20,000 (2,000) 600 (3,000) 900 $16,500

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NCI Percentage of change of retained earnings for the year of 2017/18 = 16,500 x 20% = $3,300

QUESTION 2

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Acquisition Analysis as at 1st July 2016 $

$ 400,0 00

Cost of Acquisition FVINA 660,0 00 100,0 00 440,0 00

Share Capital General Reserves Retain Earnings ARR 28 0,000 70 ,000

Land [1,600,000 -1200,000]x[1-0.3] Plant [1100,000 -1000,000]x[1-0.3] Total

350,0 00 1,550,0 00 25%

FVINA Acquired Goodwill on acquisition

(387,5 00) 12,5 00

Date 01-Jul 16

Account Dr ($) Cr ($) Investment in Associate and Joint Venture (A&JV) – 400,000 Amani Ltd Cash 400,000 (Record 25% investment of Associate and Joint Venture) 30-Jun 18 Investment in Associate and Joint Venture (A&JV) – 101,500 Amani Ltd Share of Profit & Loss of Associate and Joint Venture 101,500 (ARJV) - Amani Ltd (Record share of profit or loss of Associate and Joint Venture for the year of 2017/18) 30-Jun 18 Dividend Revenue [40000 + 50000] x [25%] 22,500 22,500 Investment in Associate and Joint Venture (A&JV) – Amani Ltd (Record dividend received for the period of 2017/18) 30-Jun 18 Investment in Associate and Joint Venture (A&JV) – 2,500 Amani Ltd [10000 x 25%] Share of OCI of Associate and Joint Venture (A&JV) – 2,500 Amani Ltd (Record gain on revaluation of land) 30-Jun 18 Share of OCI of Associate and Joint Venture (A&JV) – 2,500

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Amani Ltd [10000 x 25%] Assets Revaluation Surplus (ARS) (Record Accumulation of revaluation increase in equity) 30-Jun 18 Investment in Associate and Joint Venture (A&JV) – 96,500 Amani Ltd Retained Earnings (1/7/2017) (Recognition of equity-accounted prior period profit of Amani Ltd) 30-Jun 18 Investment in Associate and Joint Venture (A&JV) – 5,000 Amani Ltd [20000 x 25%] Assets Revaluation Surplus (ARS) (Record Accumulation of revaluation increase in equity for the period of 2016/17)

2,500

96,500

5,000

Workings Profit After Tax (-) Depreciation of Plant After Tax [100,000 /5]x[1-0.3] Adjusted Profit Investors Share of Adjusted Profit [406,000] x 25%

Retained Earnings as at 1st of July 2017 (-) Retained Earnings as at 1st of July 2016 Movement in Retained Earnings (+) Movement in General Reserves

(-) Depreciation of Plant After Tax [100,000 /5]x[1-0.3] Adjusted Profit Investors Share of Adjusted Profit [386,000] x 25%

Assets Revaluation Surplus at 30th June 2018 (-) Gain on Revaluation of Land Assets Revaluation Surplus at 30th June 2017 (-) Assets Revaluation Surplus at 1st of July 2016 Movement in Asset Revaluation Surplus for 2016/17

$ 420,000 (14,000 ) 406,000 25% 101,500 $ 820,000 (440,000 ) 380,000 20,000 400,000 (14,000 ) 386,000 25% 96,500

$ 310,000 (10,000) 300,000 (280,0 00) 20,000

Workings $

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Fair Value of Land at 1st of July 2016 (-) Carrying Amount of Land as at 1st of July 2016 Revaluation Gain as at acquisition date Assets Revaluation Surplus [400,000] x[1-0.3]

1,600,00 0 (1200,0 00) 400,000 0.7 280,000

QUESTION 3

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Date

Account

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Cr ($)

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30-Apr 18

Accounts Receivables Cash Sales Revenue(400000/0.75) (Record 30% of cash receipt and sales revenue at 30th April 2018) 30-Jun 18 Accounts Receivable Foreign Exchange Gain (Record foreign exchange gain at reporting date) 31-Jul 18 Cash Accounts Receivables (Record 20% of settlement at 31st July 2018) 31-Jul 18 Foreign Exchange Loss Accounts Receivables (Record foreign exchange loss at 31st July 2018) 31-Aug 18 Cash Accounts Receivables (Record remaining settlement at 31st August 2018) 31-Aug 18 Foreign Exchange Loss Accounts Receivables (Record foreign exchange loss at 31st August 2018)

373,333 160,000 533,333 26,667 26,667 108,108 108,108 21,622 21,622 256,410 256,410 13,860 13,860

Workings

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1/2/18 A$1 =US$ 0.77

30/4/18 A$1 =US$ 0.75

30/6/18 A$1 =US$ 0.70

31/7/18 A$1 =US$ 0.74

31/8/18 A$1 =US$ 0.78

FOB US $ 400,000

Paid 30% 0n Delivery

Reporting Date

Paid 20%

Paid 50%

US$ 400,000

US$ 400,000

US$ 400,000

US$ 400,000

X 30%

X 70%

X 20%

X 50%

US $ 120,000

US $ 280,000

US $ 80,000

US $ 200,000

Available

US$ 400,000

US$ 280,000

US$ 280,000

Balance in AS$

US$ 0.75

US$ 0.70

US$ 0.74

AS$ 533,333

AS$ 400,000

AS$ 378,378

Paid Amount/ Outstanding Bal in US$

Paid Amount

US $ 120,000

US $ 80,000

US $ 200,000

in AS$

US$ 0.75

US$ 0.74

US$ 0.78

AS$ 160,000

AS$ 108,108

AS$ 256,410

Accounts Receivable

AS$ 533,333 (AS$ 160,000)

AS$ 378,378 (AS$ 108,108)

Balance in AS$

AS$ 373,333

AS$ 270,270

Foreign Exchange Gain/Loss

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AS$ 400,000

AS$ 378,378

AS$ 256,410

(AS$ 373,333) AS$ 26,667

(AS$ 400,000) (AS$ 21,622)

(AS$ 270,270) (AS$ 13,860)

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