Assessment Type: Short report on consolidated financial statements and calculations – individual assessment.
Purpose: This assessment is designed to allow students to research and analyse accounting standards and interpret how they apply to various corporate groups. It enables students to identify and solve problems relating to accounting for consolidated groups. It allows students to communicate the financial affairs of a company to financial report users. This relates to learning outcomes a, b and c.
Value: 30% Due Date: Week 10 – Friday 8.00 pm.
Submission: Soft copy uploaded to Moodle via KOI’s Moodle subject homepage.
Topic: Consolidated worksheet, consolidated financial statements.
Task Details: Golden Ltd acquired all the issued shares of Bandicoot Ltd on 1 July 2019. Golden Ltd paid $40 000 cash plus 100 000 shares in Golden Ltd which had a fair value of $2 per share.
At the acquisition date all the identifiable assets and liabilities of Bandicoot Ltd were recorded at amounts equal to their fair values, except inventory, which had a fair value $1500 greater than its carrying amount.
All this inventory was sold by Bandicoot Ltd prior to 30 June 2020. Bandicoot Ltd conducts a strong research and development division. It has expensed all past outlays. Golden Ltd has assessed that onprocess research and development has a fair value of $12 000. It assessed this asset at 30 June 2020 and decided that $3000 of this asset should be written off as amortisation expense.
In the 2019 annual report Bandicoot Ltd reported in the notes the existence of a contingent liability relating to damages being sought by a supplier.
Golden Ltd assessed the liability to have a fair value at 1 July 2019 of $10 500. Bandicoot Ltd made an out-of-court settlement with the supplier in August 2019, paying $10 000 to the supplier. The income tax rate is 30%.
Intragroup transactions occurring in the 2019–20 period were as follows.
(a) During the course of the year, Bandicoot Ltd sold inventory to Golden Ltd. Total sales were $60 000, these being sold at cost plus 25%. At 30 June 2020, Golden Ltd still held inventory that it had bought from Bandicoot Ltd for $15 000.
(b) On 1 January 2020, Golden Ltd acquired $90 000 of debentures previously issued by Bandicoot Ltd.
These were acquired on the open market for $85 500. Interest on debentures is paid half-yearly. Interest due on 30 June 2020 has been paid by Bandicoot Ltd.
(c) On 1 April 2020, Golden Ltd sold an item of inventory to Bandicoot Ltd for $45 000. This asset had cost Bandicoot Ltd $36 000 to manufacture. The asset is to be used by Bandicoot Ltd as part of its plant and machinery. The depreciation rate used by Bandicoot Ltd for this type of asset is 20% p.a. on cost.
The financial information provided by the two entities at 30 June 2020 was as follows: