ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 1UNITCODE:ACT305UNITNAME:CORPORATEACCOUNTINGAssignment InformationSemester Two 2017Assessment 20%Maximum Marks: 100Instructions:If you create your worksheets in excel, please copy and paste them intoMSWord. Points are given for the quality of your calculation formats even if your finalcalculations are not correct. Once you have completed the assignment, it needs to be lodged through SafeAssign in the Assessments section of Learnline with an appropriate CDU coversheet. Your assessments must be lodged usingMSWord. Note: PDF, Excel or paper copies will not be accepted. Required: 1)Make sure your entire assignment can be readily printed on A-4paper in portrait (preferred) or landscape format with appropriate pagebreaks. Do not have a portion of a “wide” worksheet expand beyond 1page. 2)Make sureyour name and student number are on every page of yoursubmission. ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 2Question 1: (Marks 10)You own a financial accounting services called MyOwnWork Consultancy Pty Ltd. It’s thecompany you have established after graduating with honours degree in accounting andmanagement. The finance director of Millionaires Club Pty Ltd (MC) which is a privatecompany with many strategic investments, approached you and began discussing his concernthat he might be required to consolidate some of these investments, pursuant to AASB 10. Details of the investment relationships are as follows:a)MC has a 25 per cent interest in the share capital of LBX Pty Limited (LBX), which isa company involved in the same industry as MC. The remaining 75 per cent of theshare capital is owned by LBX’s founders, Mr and Mrs T. Mr and Mrs T areunfamiliar with the industry and so have given MC three seats out of the five seatsavailable on the board of directors. MC takes all the lead on all decisions, but thebusiness is closely monitored by Mr and Mrs T, who hold the other two boardpositions.b)MC has a substantial loan receivable from BBT Pty Ltd (BBT). BBT, as a result ofthe current economic climate, has experienced significant trading problems. BBT hasfailed to make its regular payments under the loan with the management of BBT thatMC executives will take control of the company’s finances for a period of five years. An executive of MC has been given control of BBT’s cheque book and makes allpayments. MC has not gained any seats on BBT’s board of directors, which is stilldominated by BBT shareholders. c)MC owns 50 per cent of Chatime Tea Ltd (CTL), with the other 50 per cent beingowned by Boost Juice Ltd (BJL). Both companies have equal voting rights and anequal share of seats on the board of directors. Under the agreement with BJL, MCsupplies the finance to the company on normal commercial terms. the loan is fullysecured against the assets of the company. BJL provides the management andentrepreneurial flair to CTL. under the agreement forged, BJL will receive amanagement fee in respect of the net profits of CTL after allowing for interestpayments on the MC loan. In times of no profits, the interest payments will still bemet, but BJL will not receive any remuneration.d)MC, Coffee Club Ltd (CCL) and Gloria Jeans Ltd (GJL) are each 33.33 per centshareholders of PGH Pty Ltd, a small proprietary company that is involved in themusic industry. CCL and GJL are passive shareholders with the one board seat eachout of a total of three. MC has one board seat and is also involved in the day-to-dayrunning of the business.e)MC hold a 75 per cent interest in JB Wifi Pty Ltd. The interest was created when MCconverted a substantial loan it made to JB Wifi into equity at the invitationof JB Wifiwhen JB Wifi began to trade poorly and recovery of the loan seemed uncertain. JBWifi has a large deficiency in net assets and has been consolidated for many years. MC is a passive investor, having no seats on the board of directors and no say in thefinancing or operating decisions of JB Wifi.ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 3Required: Being the owner and CEO of MyOwnWork Consultancy Ltd, advise the finance director ofMC of the requirements of AASB 10 in respect of the control criterion. For each of theabove investments, indicate where the control rests and whether or not consolidation will berequired. Discuss the reasons for your answers. Where possible, support your answer withexcerpts from AASB 10. You will be marked based on the explanation of your answer and not the Standard’s wordingsitself. Maximum 150 words per situation, excluding any words quoted from the standard.Question 2 (Marks 20)ChallengeMe Pty Ltd acquired 100 per cent of the issued capital of TakeItEasy Ltd on 30June 2018 for $900 000, when the statement of financial position of TakeItEasy Ltd was asfollows:Additional Information:?Tax rate is 30 per cent?As at the date of acquisition, all assets of TakeItEasy Ltd were at fair value, other than theproperty, plant and equipment, which had a fair value of $530 000. TakeItEasy Ltdadopts the cost model for measuring its property, plant and equipment. The property,plant and equipment is expected to have a remaining useful life of 10 years, and noresidual value.?One year following acquisition it was considered that TakeItEasy Ltd’s goodwill had arecoverable amount of $60 000.?TakeItEasy Ltd declared a dividend of $40 000 on 10 July 2018, with the dividends beingpaid from pre-acquisition retained earnings.Statement of financial position TakeItEasy Ltd as at 30 June 2018$(‘000)$(‘000)AssetsLiabilitiesAccounts receivable70 Loan300Inventory100Land400Shareholders’ equityProperty, plant and equip700Share Capital500Accumulated depreciation (270) Retained Earnings2001,0001,000ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 4The statements of financial position and statements of comprehensive income ofChallengeMe Pty Ltd and TakeItEasy Ltd one year after acquisition are as follows:Required:Provide the consolidated accounts of ChallengeMe Pty Ltd and TakeItEasy Ltd as at 30 June2019 with the following:?Acquisition analysis in recognition for Goodwill or Gain from Bargain Purchase.Show relevant calculations?All relevant worksheet journal entriesoFair Value of assets adjustmentoPre-acquisition eliminating entries?Consolidated worksheet for ChallengeMe Pty Ltd and its controlled entity for theperiod ending 30 June 2019 showing columns of Eliminations and adjustments andconsolidated amounts?Consolidated statement of financial position of ChallengeMe Group.Statement of financial position of ChallengeMe Pty Ltd and TakeItEasy LTd as at 30 June 2019ChallengeMe Pty Ltd($000)TakeItEasy Ltd($000)AssetsCash8040Accounts receivable5050Inventory140123Land600400Property Plant and equipment900700Accumulated depreciation(300)(313)Investment in Beach Ltd900-Total non-current assets2,3701,000LiabilitiesAccounts payable10010Dividends payable10050Loan670140Shareholders’ equityShare capital1,000500Retained earnings500300Total shareholders’ equity2,3701,000Reconciliation of opening and closing retained earningsProfit after tax400190Retained earnings — 30 June 2018300200Interim dividend(90)(40)Final dividend(110)(50)Retained earnings — 30 June 2019500300ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 5Question 3 (Marks 10)I Love Corporate Accounting Ltd commences operations on 1 July 2018 and presents its firststatement of profit and loss and other comprehensive income and first statement of financialposition on 30 June 2019. The statements are prepared before considering taxation. Thefollowing information is available:Other information?All administration and salaries expenses incurred have been paid as at year end.?None of the long service leave expense has actually been paid. ?Warranty expenses were accrued, and at year end, actual payments of $10 000 have beenmade (leaving an accrued balance of $20 000). ?Insurance was initially prepaid to the amount of $30 000. At year end, the unusedcomponent of the prepaid insurance amounted to $10 000.Statement of profit or loss and other comprehensive income for the year ended 30 June 2019Gross Profit730,000ExpensesAdministration expenses80,000Salaries200,000Long-service Leave20,000Warranty expenses30,000Depreciation expense – plant80,000Insurance20,000430,000Accounting profit before tax300,000Other comprehensive incomeNilAssets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019AssetsCash20,000Inventory100,000Accounts receivable100,000Prepaid Insurance10,000Plant – cost400,000Less: Accumulated depreciation80,000320,000Total assets550,000LiabilitiesAccounts payable80,000Provision for warranty expenses20,000Loan payable200,000Provision for long service leave expenses20,000Total liabilities320,000Net assets230,000ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 6?Amounts received from sales, including those on credit terms, are taxed at the time of saleis made.?The plant is depreciated over five years for accounting purposes, but over four years fortaxation purposes.?The tax rate is 30 per centRequired:Prepare Deferred Tax worksheet for I Love Corporate Accounting Ltd as at 30 June 2019 andprovide the Journal entries to account for tax in accordance with AASB 112. Includesupporting calculation such as Taxable Income.Question 4 (Marks 20)Assuming that Wiley & Sons Australasia Ltd acquires 70 per cent of WileyPlus Ltd for acash price of $10 million when the share capital reserves of WileyPlus are:Share Capital $8 millionRetained Earnings $2 million $10 millionRequired:a)What amount will be shown in the consolidated statement of financial position forgoodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquirer ismeasured at fair value?b)What amount will be shown in the consolidated statement of financial position forgoodwill pursuant to AASB 3, assuming that any non-controlling interest in the acquireris measured at the non-controlling interest’s proportionate share of the acquiree’sidentifiable net assets?c)What are some of the implications of allowing the group to have two options inaccounting for goodwill on consolidation? Discuss your answer. Maximum 200 words.ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 7Question 5 (Marks 40)The following financial statements of FinalHeadache Ltd and its subsidiary Solutions Ltdhave been extracted from their financial records at 30 June 2019.Reconciliation of opening and closing retained earningsFinalHeadache Ltd($000)Solutions Ltd($000)Sales revenue671.4540Costs of goods sold(464)(238)Gross Profit207.4302Dividends received from Solutions Ltd93-Management fee revenue26.5-Gain on sale of plant4035ExpensesAdministrative expenses(30.8)(38.7)Depreciation(29.5)(56.8)Management fee expenses-(26.5)Other expenses(101.1)(72)Profit before tax205.5143Tax expense(61.5)(42.2)Profit for the year144100.8Retained earning — 30 June 2018319.4239.2463.4340Dividends paid(137.4)(93)Retained earnings at 30 June 2019326247Statements of financial positionFinalHeadache Ltd($000)Solutions Ltd($000)Shareholders’ equityRetained earnings326247Share capital350200Current liabilitiesAccounts payable54.746.3Tax payable41.325Non-current liabilitiesLoans173.5116945.5634.3Current assetsAccounts receivable59.462.3Inventory9229Non-current assetsLand & Buildings224326Plant – at cost299.85355.8Accumulated depreciation – plant(85.75) (138.80)Investment in Solutions Ltd356-945.5634.3ACT 305 Corporate Accounting Assignment Due Date: 11.59 pm Friday 6th October in Study Week 11Page | 8Other Information:?FinalHeadache Ltd acquired its 100 per cent interest in Solutions Ltd on 1 July 2014, thatis five years earlier. At that date the capital and reserves of Solutions Ltd were:Share Capital $200 000Retained Earnings $180 000 $380 000At the date of acquisition all assets were considered to be fairly valued (Thank goodness!)?During the year FinalHeadache Ltd made a total sales to Solutions Ltd of $60 000, whileSolutions Ltd sold $50 000 in inventory to FinalHeadache Ltd.?The opening inventory in FinalHeadache Ltd as at 1 July 2018 included inventoryacquired from Solutions Ltd for $40 000 that costs Solutions Ltd $30 000 to produce.?The closing inventory in FinalHeadache Ltd includes inventory acquired from SolutionsLtd at a cost of $33 000. This cost Solutions Ltd $28 000 to produce?Closing inventory of Solutions Ltd includes inventory acquired from FinalHeadache Ltdat a cost of $12 000. This cost FinalHeadache Ltd $10 000 to produce.?On 1 July 2018 Solutions Ltd sold an item of plant to FinalHeadache Ltd for $116 000when its carrying value in Solutions Ltd’s account was $81 000 (cost $135 000,accumulated depreciation $54 000). This plant is assessed as having a remaining usefullife of six years. The Group has a policy of measuring its property, plant and equipmentusing the ‘cost model’.?Solutions Ltd paid $26 500 in management fee to FinalHeadache Ltd.?The tax rate is 30 per centRequired:Prepare the following for FinalHeadache Ltd and Solutions Ltd as at 30 June 2019:?Acquisition analysis to recognise Goodwill or Gain from Bargain Purchase showsupporting calculations?All relevant worksheet entries oPre-acquisition eliminating entriesoIntercompany eliminating entries?Consolidated worksheet for FinalHeadache Ltd and its controlled entity for the periodending 30 June 2019 showing columns of Eliminations and adjustments andconsolidated amounts?Consolidated statement of profit or loss of FinalHeadache Group?Consolidated statement of financial position of FinalHeadache Group. Hard work pays off. Good Luck?