Consolidation Case Study - Accounting & Finance Assignment Help

Assignment Task

Section 1: Consolidation Case Study - Galaxy Ltd and Moon Ltd
Galaxy Ltd acquired 80% of the share capital of Moon Ltd on 1 July 2012. The following equity balances appeared in the records of Moon Ltd at the date of acquisition:
Share capital (210,000 shares)   $210,000
General reserve   6,100
Retained earnings   75,000
Financial information at 30 June 2017 of Galaxy Ltd and its subsidiary company, Moon Ltd, is shown below.
Galaxy Ltd Moon Ltd
$   $
Sales revenue 708,000 492,000
Cost of sales (273,000)   (178,500)
Gross Profit 435,000 313,500
Other revenue: Debenture interest — 10,500
Management fees 10,500 —
Dividend from Moon Ltd 16,800   —
462,300 324,000
Administrative expenses (31,500) (16,800)
Distribution expenses (189,000) (126,000)
Depreciation on machinery (31,500) (31,500)
Finance expenses (27,600) (12,000)
Other expenses (29,400)   (25,200)
Total operating expenses (309,000)   (211,500)
Profit before tax 153,300 112,500
Income tax expense (52,500)   (34,500)
Profit after tax 100,800 78,000
Retained earnings (1/7/2016) 105,000   94,500
205,800 172,500
Transfer to general reserve (6,300) —
Interim dividend paid (31,500) (21,000)
Final dividend declared (37,800)   (42,000)
(75,600)   (63,000)
Retained earnings (30/6/2017) 130,200 109,500
General reserve 105,000 36,000
Other components of equity (1/7/2016) 27,300 21,000
Share capital 630,000 210,000
Liabilities: Debentures 255,000 60,000
Deferred tax liability — 14,700
Current tax liability 52,500 35,700
Dividend payable 37,800 42,000
Other current liabilities 189,000   25,200
1,426,800   554,100
Cash and cash equivalents 107,100 6,000
Trade receivables 68,250 40,200
Inventory 189,000 58,500
Debentures in Galaxy Ltd 105,000
Shares in Moon Ltd 270,000 —
Machinery (cost) 252,000 214,200
Accumulated depreciation – machinery (136,500) (115,500)
Other depreciable assets 159,600 115,500
Accumulated depreciation (84,000) (52,500)
Deferred tax asset 179,25063,000Land 422,100   119,700
1,426,800   554,100
Additional information
At 1 July 2012, all the identifiable assets and liabilities of Moon Ltd were recorded at fair value except for the following assets:
    Carrying amount   Fair value
Land   $62,000   $80,000
Machinery (cost 135,000)   105,000   120,000
Receivable 42,000 36,000
The machinery 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 2012 was sold on 1 March 2014 for $84,000. Any valuation reserve in relation to the land is transferred on consolidation to retained earnings. By 30 June 2013, receivables had all been collected.
Galaxy Ltd uses the full goodwill method. The fair value of the non-controlling interest at 1 July 2012 was $66,000.
Opening inventory of Moon Ltd includes unrealised profit of $5,000 on inventory sold by Galaxy Ltd. It was all sold by Moon Ltd during the year.
During the year, intragroup sales by Moon Ltd to Galaxy Ltd were $80,000. The mark-up on cost of all sales was 25%. At 30 June 2017, Galaxy Ltd’s inventory included $35,000 of items acquired from Moon Ltd.
On 1 January 2017, Moon Ltd sold an item of inventory to Galaxy Ltd for $18,000 at a profit before tax of $3000. Galaxy Ltd had treated this item as an addition to its machinery and depreciated at 10% p.a. straight-line.
On 1 April 2017, Galaxy Ltd sold $15,000 worth of inventory to Moon Ltd. The cost of this inventory was $9000. By 30 June 2017, Moon Ltd had sold 60% of the inventory to outside entities.
Some of the items manufactured by Moon Ltd are used as machinery by Galaxy Ltd. One of the machinery items held by Galaxy Ltd at 30 June 2017 was purchased from Moon Ltd on 1 January 2016. It had cost Moon Ltd $17,500 to manufacture this item and was sold to Galaxy Ltd for $25,000. Galaxy Ltd depreciates such items at 10% p.a. on cost.
Management fees derived by Galaxy Ltd were all from Moon Ltd and represented charges made for administration.
The tax rate is 30%.

Required:
Prepare the acquisition analysis at 1 July 2012.
Prepare the consolidation journal entries, including:
The business combination valuation entries;
The pre-acquisition entries;
The intra-group entries (considering the effects on non-controlling interests);
Calculate NCI share of equity at following dates and prepare the journal entries (not considering the effects of intra-group transactions):
1 July 2012;
1 July 2012 – 30 June 2016;
1 July 2016 – 30 June 2017. 

Show the balance of following accounts presented in the consolidated financial statement
The balance of Non-Controlling Interests in the consolidated financial statement;
The balance of Business Combination Revaluation Reserve (BCVR) in the consolidated financial statement,
The balance of Deferred Tax Assets in the consolidated financial statement;

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