Melbourne

a) Prepare the acquisition analysis as at 1 July 2015. (3 Marks).  

 

Marking guide: total of 12 ticks / 4 = 3 marks.

Consequential errors will be penalised. 

 

b) Prepare the BVCR and pre-acquisition worksheet entries ONLY as at 30 June 2016. (5 marks)

 

Marking guide: total of 41 ticks / 8.2 = 5 marks.

Journal entry – 1 tick for each correct line entry – i.e. correct account description AND amount (NO TICK for correct description only or correct amount only.)

Consequential errors will not be penalised. 

 

c) Prepare full consolidation worksheet entries as at 30 June 2018. (12 marks)

 

Marking guide: total of 82 ticks / 6.83 = 12 marks.

Journal entry – 1 tick for each correct line entry – ie correct account description AND amount (NO TICK for correct description only or correct amount only.)

Consequential errors will not be penalised. 

On 1 July 2015, Victoria Ltd acquired 70% of the shares of Melbourne Ltd for $526,000 on a cum div. basis. Victoria Ltd had acquired 30% of the shares of Melbourne Ltd two years earlier for $180,000. This investment, classified as an available-for-sale investment, was recorded at a fair value on 1 July 2015 of $226,000. At 1 July 2015, the equity and liability sections of Melbourne Ltd’s statement of financial position showed the following balances:   

 

Share Capital                 460,000 

General Reserve                   50,000 

Retained Earnings                 100,000 

Other liabilities                 100,000 

Dividend payable                   30,000 

 

At acquisition date, all the identifiable assets and liabilities of Melbourne Ltd were recorded at amounts equal to fair value except for:

 

  Carrying Amount   Fair Value

Land                   95,000       100,000 

Vehicle (@ cost 40,000)                   35,000         39,000 

Equipment (@ cost 420,000)                 294,000       309,000 

Inventory                   98,000       101,000 

 

The Vehicle, which was estimated to have a further four year life at acquisition date, was sold on 1 January 2018. The equipment had a further five year life at acquisition date and was expected to be used evenly over that time. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation.

 

Melbourne Ltd had not recorded an internally developed patent. Victoria Ltd valued this patent at $90,000 and was assumed to have a ten year life. In May 2017, Melbourne sold this patent to an external party for $100,000. It also had a contingent liability of $19,000 that Victoria Ltd considered to have a fair value of $15,000. This liability was settled in July 2017.  

 

The dividend liability was paid on 1 September 2015. All inventories on hand at acquisition date were sold by June 2016. The land was sold on 1 June 2018 to Peters Ltd. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.

 

On 30 May 2017, Melbourne Ltd transferred $8,000 from the general reserve (pre-acquisition) to retained earnings. A bonus dividend of $10,000 was paid in December 2017 out of pre-acquisition profits. 

 

Goodwill was tested annually for impairment. For the year ended 30 June 2017, an impairment loss on goodwill of $4,000 was recorded.   

 


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