2103AFE: Great Ltd Case Study - Company Accounting Assignment Help

Assignment Task:

This assignment requires students to apply appropriate Australian Accounting Standards and Corporate Legislation in the preparation of accounting reports for related companies.  Students are required to complete the case study individually.  

REQUIREMENTS:

1. Complete the specified questions (see below).  

2. All answers must use proper English expression and grammar.

3. The assignment is to be submitted on-line by the due date.

Case Study 

Financial information at 30 June 2020 of Great Ltd and its subsidiary company, Wall Ltd, is shown below.

At 1 July 2017, the date Great Ltd acquired its 80% shareholding in Wall Ltd, all the identifiable assets and liabilities of Wall Ltd were at fair value except for the following assets:

The plant has an expected life of 10 years, with benefits being received evenly over that period. Differences between carrying amounts and fair values are adjusted on consolidation. The land on hand at 1 July 2017 was sold on 1 February 2018 for $40,000. Any valuation reserve in relation to the land is transferred on consolidation to retained earnings.

Great Ltd uses the full goodwill method. The fair value of the non-controlling interest at 1 July 2017 was $31,500. 

Additional information

1. At the acquisition date of 80% of its issued shares by Great Ltd, the equity of Wall Ltd was:

2. Inventory on hand of Wall Ltd at 1 July 2019 included a quantity priced at $10,000 that had been sold to Wall Ltd by its parent. This inventory had cost Great Ltd $7,500. It was all sold by Wall Ltd during the year.

3. In Great Ltd’s inventory at 30 June 2020 were various items sold to it by Wall Ltd at $5,000 above cost.

4. During the year, intragroup sales by Wall Ltd to Great Ltd were $60,000. It was also learned that Wall Ltd had sold to Great Ltd an item from its inventory for $20,000 on 1 January 2019. Great Ltd had treated this item as an addition to its plant and machinery. The item was put into service as soon as received by Great Ltd and depreciation charged at 20% p.a. The item had been fully imported by Wall Ltd at a landed cost of $15,000.

5. Management and consulting fees derived by Great Ltd were all from Wall Ltd and represented charges made for administration $2,200 and technical services $2,800. The latter were charged by Wall Ltd to manufacturing expenses.

6. All debentures issued by Wall Ltd are held by Great Ltd.

7. Other components of equity relate to movements in the fair values of the financial assets. The balance of this account at 1 July 2019 was $10,000 (Great Ltd) and $8,000 (Wall Ltd).

8. The tax rate is 30%.

Required:

Section 1 (Total 70 marks):

1. Conduct the acquisition analysis. (10 marks)

2. Prepare the consolidation journals as at 30 June 2020. (48 marks)

3. What is the total amount of non-controlling interests? (5 marks)

4. What is the total amount of Business Combination Revaluation Reserve (BCVR) shown in the group account? (4 marks)

5. What is the total amount of Goodwill shown in the group account? (3 marks)

(Note: You must show all workings. The calculation figures will be marked.)

Section 2 (Total 15 marks):

Jenny Chan is the accountant for Great Ltd.  She is required to prepare a set of consolidated financial statements for the group.  Jenny is concerned about the calculation of the NCI share of equity, particularly where there are intragroup transactions.  The auditors have advised Jenny that when adjustments are made for intragroup transaction the effects of these transactions on the NCI should also be adjusted for.  

Jenny reports to Mr Frank Finn, the Chief Financial Officer of the company.  He has asked Jenny to report to him on these issues raised by the auditor.  In her report, Jenny will need to clarify how the adjustment to NCI is made and why.  She has also been asked to explain why she has measured NCI in the subsidiary at fair value and to report on any alternative method that is available.

From the above information, discuss the issues that Jenny must address in her report to Mr Finn. In your discussions please include references to applicable accounting standards and the amounts used in your consolidation workings (at least two examples for each argument are to be provided).

Section 3 (Total 15 marks):

In making consolidation worksheet adjustments, sometimes tax-effect entries are made. Why? Make reference to applicable accounting standards and the amounts used in your consolidation workings (at least two examples for each argument are to be provided). 

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