BAP32 – Corporate Accounting
Trimester 3, 2020
Due Date: Submit online through MyGCA by 5 pm, Thursday 12 November 2020 (week 10).
Length: 1200 words including calculations
Referencing: Harvard Referencing
Plagiarism: Due to numeric calculations up to 40% similarity will be considered. More than 40% similarity will be penalised. More than 80% similarity will be awarded zero.
Group: No more than 3 members in a group. Please organise yourselves into groups. After the formation of the group, you must inform your lecturer by email.
From : Member1@email
To : firstname.lastname@example.org
CC : Member2@email, Member3@email
Subject : Group for BAP32 Group Assignment
Information provided in the email:
Name of Member 1, Mobile number used for assignment communication purpose)
Name of Member 2, Mobile number (used for assignment communication purpose)
Name of Member 3, Mobile number (used for assignment communication purpose)
Research Essay (5%)
You will be required to investigate 2 (two) ASX listed companies corporate reporting on Fair Value.
Instruction for the case study:
You are required to download the financial reports of any two selected companies and identify the required information from the notes on fair value disclosures. You need to compare as to how two companies’ fair value disclosures are made.
In your answer, you need to identify and report on comparative fair value hierarchies and methods used for differing classes of assets by the selected two companies.
The page numbers of the respective documents must be included using “Insert footnote” option in Microsoft Words. Please follow the referencing as the example below:
1Discussion in this paragraph is from page 240 of the annual report, Commonwealth bank.
2Discussion in this paragraph is from page 252 of the annual report, ANZ bank.
1 Page 240 – https://www.commbank.com.au/content/dam/commbank-assets/about-us/2019-08/CBA-2019Annual-Report-Financial-report.pdf
2 Pare 252 - https://www.anz.com/content/dam/anzcom/shareholder/ANZ-2019-Annual-Report.pdf
Case 1: Accounting by the acquirer (5%)
The trial balance of Packman Ltd at 1 January 2019 was as follows:
Preference - 15 000 fully paid shares 15000
Ordinary - 70 000 fully paid shares 70000
Retained earnings 43000
Accumulated depreciation - equipment 20000
Accounts receivable 33000
Accounts payable 16000
At this date, all the assets and liabilities of Packman Ltd are sold to Zaba Ltd, with Packman Ltd going into voluntary liquidation. The terms of acquisition are:
(a) Zaba Ltd is to take over all the assets of Packman Ltd, as well as the accounts payable of Packman Ltd.
(b) Costs of liquidation of $700 are to be paid by Packman Ltd with funds supplied by Zaba Ltd.
(c) Preference shares in Packman Ltd are to receive two fully paid shares in Zaba Ltd for every three shares held, or alternatively, $0.80 per share in cash payable at the acquisition date.
(d) Ordinary shareholders of Packman Ltd are to receive two fully paid ordinary shares in Zaba Ltd for every share held or, alternatively, $2.50 in cash payable half at the acquisition date and half in one year’s time.
(e) Debenture holders of Packman Ltd are to be paid in cash out of funds provided by Zaba Ltd. The debentures have a fair value of $102 per $100 debenture.
(f) All shares issued by Zaba Ltd have a fair value of $1.20 per share.
(g) Costs of issuing and registering the shares issued by Zaba Ltd amount to $80 for the preference shares and $200 for the ordinary shares.
(h) Legal and accounting costs associated with the acquisition of Packman Ltd amount to $2000.
The two parties agree on the terms of the arrangement, and holders of 6 000 preference shares and 10 000 ordinary shares elect to receive cash.
Zaba Ltd assesses the fair values of the identifiable assets and liabilities of Packman Ltd to be as follows:
Accounts receivable 29000
Accounts payable 16000
Zaba Ltd has an incremental borrowing rate of 10%.
(a) Prepare the acquisition analysis in relation to the above acquisition by Zaba Ltd.
(b) Prepare the journal entries in the records of Zaba Ltd at the date of acquisition.
(c) Prepare the journal entry for the payment of the deferred consideration in one year’s time.
Case 2: Consolidation worksheet, previously held investment in subsidiary (5%)
On 1 August 2018, ITP Syd Ltd acquired 10% of the shares in Peters Ltd for $8000. ITP Syd Ltd used the fair value method to measure this investment with movements in fair value being recognised in profit or loss. At 1 July 2017, the fair value of this investment was $15 400. The original investment in Peters Ltd was due to the fact that Peters Ltd was undertaking research into particular microbiological elements that could influence the profitability of ITP Syd Ltd. With the continuing success of this research, ITP Syd Ltd decided to acquire the remaining shares (cum div.) in Peters Ltd.
On 1 July 2017, ITP Syd Ltd made an offer to buy the remaining shares in Peters Ltd for $151 000 cash. This offer was accepted by the shareholders of Peters Ltd. On 1 July 2017, immediately after the business combination, the statement of financial position of Peters Ltd was as follows:
ITP Syd Ltd Peters Ltd
Share capital 130,000 90,000
General reserve 56,500 12,000
Retained ea rnings 93,500 36,000
Total equity 280,000 138,000
Dividend payable 25,000 12,600
Other liabili ties 75,000 25,000
Total liabilities 100,000 37,600
Total equity and liabilities 380,000 175,600
Cash 11,000 20,600
Receivables 25,200 20,000
Other assets 10,000 8,000
Shares in Peters Ltd 153,800 -
Inventories 55,000 42,000
Plan and equipment 210,000 107,000
Accumulated depreciation - 85,000 - 22,000
Total assets 380,000 175,600
On analysing the financial statements of Peters Ltd, ITP Syd Ltd determined that all the assets and liabilities recorded by Peters Ltd were shown at amounts equal to their fair values except for:
The plant and equipment is expected to have a further 4-year life and is depreciated on a straightline basis. The inventory was all sold by 30 June 2018.
Peters Ltd had expensed all the outlays on research and development. ITP Syd Ltd placed a fair value of $12 000 on this asset. Peters Ltd also had reported a contingent liability at 30 June 2017 in relation to claims by customers for damaged goods. ITP Syd Ltd placed a fair value of $3000 on these claims. The research and development is amortised evenly over a 10-year period. The claims by customers were settled in May 2018 for $2800.
The company tax rate is 30%.
(a) Prepare the consolidated financial statements of ITP Syd Ltd at 1 July 2017, immediately after the business combination.
(b) Prepare the consolidation worksheet entries at 30 June 2018.
Case 3: Intragroup transactions (5%)
Ammi Ltd owns all of the shares of VStone Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%.
(a) On 1 January 2018, Ammi Ltd sold inventory costing $6000 to VStone Ltd at a transfer price of $9000. On 1 September 2018, VStone Ltd sold half these items of inventory back to Ammi Ltd, receiving $3000 from Ammi Ltd. Of the remaining inventory kept by VStone Ltd, half was sold in January 2019 to Goanna Ltd at a loss of $200.
(b) On 1 January 2019, VStone Ltd sold an item of plant to Ammi Ltd for $2000. Immediately before the sale, VStone Ltd had the item of plant on its accounts for $3000. VStone Ltd depreciated items at 5% p.a. on the diminishing balance and Ammi Ltd used the straight-line method over 10 years.
(c) On 1 July 2018, Ammi Ltd sold a motor vehicle to VStone Ltd for $12 000. This had a carrying amount to Ammi Ltd of $9600. Both entities depreciate motor vehicles at a rate of 10% p.a. on cost.
(d) During the 2017–18 period, Ammi Ltd sold inventory to VStone Ltd for $9000, recording a before-tax profit of $1800. Half this inventory was unsold by VStone Ltd at 30 June 2018.
(e) VStone Ltd sells second-hand machinery. Ammi Ltd sold one of its depreciable assets (original cost $80 000, accumulated depreciation $64 000) to VStone Ltd for $10 000 on 1 January 2019. VStone Ltd had not resold the item by 30 June 2019.
(f) On 1 May 2019, VStone Ltd sold inventory costing $300 to Ammi Ltd for $380 on credit. On 30 June 2019, only half of these goods had been sold by Ammi Ltd, but Ammi Ltd had paid $280 back to VStone Ltd.
Each member must fill the peer review form separately and hand in to the lecturer. Appendix A. Appendix A – Peer Review form
Group Name :
Name & Student ID of the member who submitted the research assignment on behalf of the group
in MyGCA (If by mistake more than one submissions are done, you will be penalised for the similarity.) :
Consider the contribution of yourself and each of your group members. What tasks did each group member do for the research assignment, and what proportion of the total effort do you think each group member contributed?
Student ID & Name Tasks Proportion of total effort
Consider the contribution of yourself and each of your group members. What mark would you give each person out of 10? You must explain why.
Student ID & Name Mark Out of 10 Explain in detail WHY the person deserves this mark. Please note that NO ONE is perfect (i.e. worth 10 marks)
Your Name :
Time & Date :
Your signature :