ACCT20073 - Company Accounting - Business Combinations and Consolidation - Wholly Owned Entities - Accounting Assessment Answer

Assessment Task:

ACCT20073: Company Accounting Assessment Answer

The plant was considered to have a further 5-year life. The plant was sold for $15,500 on 1 January 2019. The land was sold on 1 February 2018 for $15,000. The inventories were all sold by 30 June 2018. Also, at acquisition date ‘Y’ Ltd had recorded a dividend payable of $700 and goodwill (net of accumulated impairment losses of $1,300) of $500. ‘Y’ Ltd had not recorded some internally generated brands that ‘X’ Ltd considered to have a fair value of $1,200. The brand was considered to have an indefinite life. Also not recorded by ‘Y’ Ltd was a contingent liability relating to a current court case in which ‘Y’ Ltd was involved and a supplier was
seeking compensation. ‘X’ Ltd placed a fair value of $1,500 on this liability. This court case was settled in May 2019 at which time ‘Y’ Ltd was required to pay damages of $1,600. In February 2018, ‘Y’ Ltd transferred $2,000 from the general reserve on hand at 1 July 2017 to retained earnings. A further $1,500 was transferred in February 2019.Both companies have an equity account entitled ‘Other components of equity’ that recognise certain gains and losses from financial assets. At 1 July 2018, the balances of these accounts were $3,000 for ‘X’ Ltd and $1,500 for ‘Y’ Ltd.

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