Note:

(a) Use this combined Assignment 5 Question and Answer Booklet word document to submit your answers online.  Do nnt change the format of this document when submitting it online.  At times, more space has been provided than is necessary to answer a question.

(b) It is your responsibility to ensure this assignment is successfully submitted before 6 pm on Friday, 02 June 2023.

what does ‘successfully submitted' mean?

It means your completed Assignment 5 ouestion and Answer Booklet (You must submit the correct        document for each assignment) was accepted by speedgrader (Ultimately, there must be an acceptance cut-off policy. Late submissions, as determined by speedGrader, cannot be accepted for grading. It may take speedGrader a few minutes to process your        submission. so? submit your assignment well before 6 pm.), and the said document is downloadable and           readable by the ACCTG 211 markers.

(c) This assignment counts for 4% of the final grade for the course.

(d) Ifyou have questions about the topics covered in this assignment, use Piazza to discuss with other students and teaching staff.

QuEST1oN 1  (This is ouestion 3 from Assignment 4 with different assumptions)

Parent Ltd has asked for your help in the preparation of consolidated financial statements for the financial year ended 31 March 2022: they value your understanding of NZ 1FRS 10         Consolidated Financial Statements and NZ 1FRS 3 Business Combinations . Parent Ltd sent  you the following information:

t   The equity in subsidiary Ltd was acquired on 1 April 2013. At that date the equity of

subsidiary Ltd comprised: share capital balance of s100 000 and Retained earnings of s30 000.

t   The identifiable net assets of subsidiary Ltd were not fairly valued on 1 April 2013     because: subsidiary Ltd had an internally generated intangible asset with an estimated fair value of s15 000. subsidiary Ltd uses the cost model for its property, plant and    equipment (PPE): the cost of the PPE was s70 000 and the fair value was estimated   to be s95 000.

t   Prior years, impairment of total goodwill amounted to s3 000. For the current year

ended 31 March 2022 the directors of Parent Ltd believe that the total goodwill has been further impaired by s4 000.

t   During the month ended 31 March 2021 subsidiary Ltd made sales to Parent Ltd of

s30 000 and recognised a profit of s5 000. Parent Ltd sold this purchase of inventory to Pink Ltd on 15 May 2021.

t   During the month ended 31 March 2022 subsidiary Ltd made sales to Parent Ltd of

s7 000 and recognised a profit of s3 200. This purchase remained in the inventory of Parent Ltd as at 31 March 2022.

t   During the month ended 31 March 2022 Parent Ltd made sales to subsidiary Ltd of

s3 000 and recognised a profit of s900. subsidiary Ltd sold this purchase of inventory to Ford Ltd on 5 April 2022.

t   subsidiary Ltd billed Parent Ltd s4 200 for consulting advice provided on 28

February 2022. This transaction had been recognised by both entities: it remained unpaid as at 31 March 2022.

t   The tax rate is 28%.

Required:

Assume Parent Ltd acquired 20% of the equity in subsidiary Ltd for s40 000 on 1 April 2013. Assume the identifiable net assets of subsidiary Ltd were fairly valued on 1 April 2013.

Prepare the following notional journal entry and determine the equity adjusted investment asset as at 31 March 2022 on the next page.

Question 1 continued:

stabilo Ltd's draft financial statements for the year ended 31 March 2022 were completed on 28 May 2022. The board of directors reviewed the financial statements on 01 June 2022 and authorised them for issue.

The new managing director of stabilo Ltd is not sure about the treatment of the following      material items in relation to the requirements of NZ 1AS 10 Events after the Reporting Period .

(i) 02 April 2022 - A fire on 12 March 2022 destroyed one of the company's warehouses. In the draft financial statements for the year ended 31 March 2022, this warehouse was            measured at its cost of s3 million less accumulated depreciation of s500 000 (i.e., a carrying amount of s2.5 million). on 02 April 2022, stabilo Ltd was advised by its insurance            company that it would only receive s1.2 million in compensation. This low amount is          because stabilo Ltd had not updated the value of its insurance cover. The fire also destroyed the inventory kept in the warehouse. In the draft financial statements for the year ended 31   March 2022, the destroyed inventory was measured at its cost of s250 000.

(ii) 15 April 2022 - During August 2021, stabilo Ltd was sued by a competitor for s500 000 for an infringement of a trademark that occurred in June 2021. Based on legal advice, stabilo Ltd included a provision of s370 000 in its financial statements for the year ended 31 March 2022. on 15 April 2022, the Court decided in favour of the competitor and ordered stabilo   Ltd to pay a sum of s400 000.

(iii) 17 April 2022 - A customer owed stabilo Ltd s122 000 on 31 March 2022: at that date,   stabilo Ltd believed the customer was financially sound. As a result, stabilo Ltd did not        provide any allowance for the customer's account being doubtful. on 17 April 2022, the        customer filed for bankruptcy because it had been insolvent since 31 March 2022. stabilo Ltd is to collect only 30% of the s122 000 receivable.

(iv) 10 May 2022 - stabilo Ltd sells sportswear. In the draft financial statements, for the year ended 31 March 2022, the inventory of rugby gear was reported at an estimated net realisable value of s374 000. The original cost of this rugby gear was s600 000. Due to worsening        negative economic trends in the rugby market, the inventory was not sold during April 2022. on 10 May 2022, stabilo Ltd entered a contract with an overseas competitor who was willing to buy the rugby gear for s190 000.

(v) 18 May 2022 - The Board of Directors of stabilo Ltd declared a final dividend of 9 cents per share for the year ended 31 March 2022. It is to be paid to the shareholders on 06 June    2022. As at 31 March 2022, there were 980 000 issued shares.

(vi) 08 June 2022 - stabilo Ltd found an error in a long-term liability loan reported in the      draft financial statements for the year ended 31 March 2022. This non-current liability was    overstated by s200 000 because a repayment had been incorrectly debited to interest expense.

Required:

Prepare a professional report for the new managing director of stabilo Ltd to explain the   correct treatment of the above six events: the report must comply with the requirements of NZ 1AS 10 Events after the Reporting Period.