WORD LIMIT 2000 WORDS (EXCLUDES REFERENCES, DIAGRAMS AND TABLES)
TOPIC – RESEARCH CASE STUDY ON CONSOLIDATED FINANCIAL STATEMENTS AND ASSOCIATED JOURNAL ENTRIES INCLUDING CONSOLIDATED WORKSHEETS.
CASE STUDY – BASIL LIMITED and LINDA LIMITED – CONSOLIDATION AND GOODWILL ANALYSIS
On 1 July 2019, BASIL Ltd acquired all the issued shares (ex-div.) of LINDA Ltd for $272 000. At this date the financial statements of Lucky Ltd showed the following balance in its accounts:
| Share Capital | $150 000 |
| General Reserve | 40 000 |
| Retained Earnings | 80 000 |
| Dividend Payable | 20 000 |
| Goodwill | 10 000 |
At 1 July 2019, all identifiable assets and liabilities of Linda Ltd were recorded at amounts equal to the fair value.
The financial statements of Basil Ltd and Linda Ltd at 30 June 2020 contained the following information:
| Basil Ltd
$ |
Linda Ltd
$ |
|
| Profit for the period | 35 000 | 25 000 |
| Retained earnings (1/7/2019) | 90 000 | 80 000 |
| Transfer form General Reserve | 0 | 10 000 |
| RETAINED EARNINGS (30/6/2020) | 125 000 | 115 000 |
| Share Capital | 700 000 | 150 000 |
| General Reserve | 92 000 | 30 000 |
| TOTAL EQUITY | 917 000 | 295 000 |
| Provisions | 30 000 | 20 000 |
| Payables | 15 000 | 25 000 |
| Long-term loans | 50 000 | 110 000 |
| TOTAL LIABILITIES | 95 000 | 155 000 |
| TOTAL EQUITY and LIABILITIES | 1 012 000 | 450 000 |
| Plant | 600 000 | 820 000 |
| Accumulated depreciation | (295 000) | (650 000) |
| Fixtures | 300 000 | 120 000 |
| Accumulated depreciation | (180 000) | (80 000) |
| Land | 200 000 | 140 000 |
| Brands | 50 000 | 30 000 |
| Shares in Linda Ltd | 272 000 | 0 |
| Goodwill | 0 | 10 000 |
| Inventories | 45 000 | 40 000 |
| Cash | 5 000 | 7 000 |
| Receivables | 15 000 | 13 000 |
| TOTAL ASSETS | 1 012 000 | 450 000 |
REQUIRED
- Prepare the acquisition analysis at 1 July 2019. (8 marks)
- Prepare the consolidation worksheet entries at 30 June 2020, including journal entries for the Business Combination Valuation Reserve and Pre-acquisition entries. ( 12 marks)
- Prepare the Consolidated Financial Statements for Basil Ltd’s group at 30 June 2020. You may use excel spreadsheet for the worksheets or use word as applicable. (18 marks)
- Prepare Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2020. (5 marks)
- Prepare Consolidated Statement of Changes in Equity for the financial year ended 30 June 2020. (7 marks)
- Prepare Consolidated Statement of Financial Position as at 30 June 2020. (10 marks)
RUBRIC – MARKING CRITERIA
| QUESTIONS | CRITERIA | MAXIMUM MARKS | INDIVIDUAL MARKS |
| 1. Acquisition analysis | Full calculations including goodwill | 8 | |
| 2. Business Combination and pre-acquisition entries | Journal entries and supporting discussion and analysis | 12 | |
| 3. Consolidated worksheet for the Group | Excel or Table format for the group including adjustments and Group Consolidation with supporting analysis | 18 | |
| 4. Consolidated Statement of Profit or Loss and other Comprehensive Income | Preparation of Consolidated Statement of Profit and Loss and other Income | 5 | |
| 5. Consolidated Statement of Changes in Equity | Preparation of Consolidated Statement in Equity | 7 | |
| 6. Consolidated Statement of Financial Position | Preparation of Consolidated Statement of Financial Position | 10 | |
| 7. Other requirements | Applicable accounting standards;
Correct referencing; Grammar, spelling, and clarity of discussion and analysis |
10 | |
| TOTAL MARKS FOR ASSIGNMENT | 70 | ||
| INDIVIDUAL MARK | DIVIDE BY 2.8 | 25 | |
| CLASS PRESENTATION | 5 | ||
| OVERALL TOTAL MARKS | 25 | ||