ACC-ACF2100 Individual Assignment
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Individual Assignment
Assessment Guide
ACC-ACF2100
Objective
The objective of this individual assignment is to advance your understanding of learning objectives in Topic 7-Topic 9. The assignment also aims to sharpen your accounting expertise and gives you an absolute advantage in your future job market.
Introduction
In the future, many of you will work in public listed companies with several subsidiaries under control. For example, Woolworths wholly owns three subsidiaries (all incorporated in New Zealand), and Coles wholly owns more than 40 subsidiaries (with three subsidiaries incorporated outside of Australia). Both Woolworths and Coles need to prepare consolidated financial statements for the group and make the consolidated financial statements publicly available. Many of you will also work in international Big-4 accounting firms and will audit consolidated financial statements of groups. For example, Deloitte audits the consolidated financial statements of Woolworths Group, and Ernst & Young audits the consolidated financial statements of Coles Group. Given these, it is crucial to understand how consolidation works and how to prepare consolidated financial statements.
In this individual assignment, you will work on a consolidation question, which requires you to integrate the knowledge that you have learned from Topic 7 to Topic 9. The consolidation question is based on a setting where a parent wholly owns a subsidiary. The consolidation question consists of four (4) parts. Part A asks you to prepare an acquisition analysis on the acquisition date. Part B asks you to prepare consolidation worksheet entries on the acquisition date. Part C asks you to prepare consolidation worksheet entries subsequent to the acquisition date. Part D asks you to state your understanding of how the consolidation process works. The consolidation question is provided in the following pages.
Marking
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Task Part A Part B Part C Part D Total marks Weight |
Marking 10 10 37 3 60 15% |
Coverage
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Topic 7 LO8 LO9 LO10 Topic 8 LO1 Topic 9 LO2
LO3
LO4 |
Explain how a consolidation worksheet is used Prepare an acquisition analysis for the parent’s acquisition in a subsidiary Prepare the worksheet entries at the acquisition date, being the business combination valuation entries and the pre-acquisition entries Prepare the worksheet entries in periods subsequent to the acquisition date
Prepare worksheet entries for intragroup transactions involving the sale of inventories including adjustments for unrealised profits or losses in beginning and ending inventories Prepare worksheet entries for intragroup transactions involving the transfer of property, plant and equipment in the current period or a prior period including adjustments for gains or losses and excess depreciation or under-depreciation Prepare worksheet entries for intragroup transactions involving transfers from inventories to property, plant and equipment and from property, plant and equipment to inventories |
Instructions
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Parts Part A Part B Part C
Part D |
Details Please follow the acquisition analysis format and detail your calculations for each step in the acquisition analysis. The worksheet entries on the acquisition date should include BCVR entries for fair value adjustments and goodwill recognision and pre-acquisition entries. The worksheet entries subsequent to the acquisition date should include BCVR entries, pre-acquisition entries, and the elimination of intragroup transaction entries. There are two methods to record the sale of PPE: Method 1: Method 2: Dr. Cash Dr. Cash Dr. Accumulated depreciation Cr. Proceeds on sale of PPE Cr. PPE Dr. Carrying amount of PPE sold Cr. Gain on sale Dr. Accumulated depreciation Cr. Plant It is the second method that the parent and the subsidiary use to record the sale of PPE. The proceeds on sale of PPE is an income account and the carrying amount of PPE sold is an expense account. Discuss how to derive a consolidated amount of sales revenue based on the information provided in the question and the worksheet entries you make. |
Submission
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Submission Submission deadline Submission document Submission location |
Details Friday 27 May 16pm A Pdf document containing all the required parts of the assignment Submit to Moodle under the “individual assignment” folder. The submission link will be available at least two days before the submission due date. |
Special consideration
If you want to apply for special consideration for this individual assignment, please email chief examiner Jenny Guan (jenny.[email protected]).
Individual Assignment
On 1 July 2018, Priscilla Ltd acquired all the issued shares of Lisa Marie Ltd. The consideration for the acquisition was $30 000 in cash and 20 000 shares in Priscilla Ltd, valued at $3 per share. At this date, the equity of Lisa Marie Ltd consisted of $66 000 share capital and $6 000 retained earnings.
At 1 July 2018, all the identifiable assets and liabilities of Lisa Marie Ltd were recorded at amounts equal to their fair values except for:
|
Carrying amount |
Fair value |
|
|
Plant (cost $150 000) Patents Inventories |
$ 120 000 90 000 18 000 |
$ 123 000 105 000 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 2018. The inventories were all sold to external entities by 30 June 2019.
Additional information
(a) Priscilla Ltd sells certain raw materials to Lisa Marie Ltd to be used in its manufacturing process. At 1 July 2021, Lisa Marie Ltd held inventories sold to it by Priscilla Ltd in the previous year at a profit before tax of $600. During the 2021–22 year, Priscilla Ltd sold inventories to Lisa Marie Ltd for $21 000. None of the inventories are on hand at 30 June 2022.
(b) Lisa Marie Ltd also sells items of inventories to Priscilla Ltd. During the 2021–22 year, Lisa Marie Ltd sold goods to Priscilla Ltd for $4500. At 30 June 2022, inventories which had been sold to Priscilla Ltd at a profit before tax of $300 are still on hand in Priscilla Ltd’s inventories.
(c) On 1 July 2021, Lisa Marie Ltd sold an item of plant to Priscilla Ltd for $15 000 that had cost Lisa Marie Ltd $14 000 on the same date. This plant is depreciated at 10% p.a..
(d) On 1 January 2021, Priscilla Ltd sold inventories to Lisa Marie Ltd for $18 000. The inventories had cost Priscilla Ltd $16 000. This item was classified by Lisa Marie Ltd as plant and depreciated at 20% p.a.
(e) On 1 March 2022, Lisa Marie Ltd sold an item of plant to Priscilla Ltd. Whereas Lisa Marie Ltd classified this as plant, Priscilla Ltd classified it as inventories. The sales price was $9000, which included a profit before tax to Lisa Marie Ltd of $1500. Priscilla Ltd sold this asset to
an external entity on 31 March 2022 for $9 900.
(f) The tax rate is 30%.
2022-05-19