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Acquisition of Strongini Ltd On 1st January 2X11, Heuston Ltd acquired 80% of the ordinary share capital (ex div) of Strongini Ltd for $3,200,000. At this date, the accounts of Strongini Ltd included

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Acquisition of Strongini Ltd
On 1st January 2X11, Heuston Ltd acquired 80% of the ordinary share capital (ex div) of Strongini
Ltd for $3,200,000. At this date, the accounts of Strongini Ltd included the following balances:
Share capital (1,000,000 shares) $1,000,000
General reserve 800,000
Retained profits 500,000
All of the identifiable net assets of Strongini Ltd were recorded at fair value except for Land which
had a fair value of $300,000 above the carrying amount. Adjustments for the differences are made
on consolidation and tax-...

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Acquisition of Strongini Ltd
On 1st January 2X11, Heuston Ltd acquired 80% of the ordinary share capital (ex div) of Strongini
Ltd for $3,200,000. At this date, the accounts of Strongini Ltd included the following balances:
Share capital (1,000,000 shares) $1,000,000
General reserve 800,000
Retained profits 500,000
All of the identifiable net assets of Strongini Ltd were recorded at fair value except for Land which
had a fair value of $300,000 above the carrying amount. Adjustments for the differences are made
on consolidation and tax-effect entries are needed.
The following is a list of the transactions between the companies for the year
ended June 2X16
(a) On 1st July 2X14, Strongini Ltd sold an item of specialised equipment to Heuston Ltd for
$180,000 at a before tax loss of $85,000. The equipment has a useful life of 5 years and is
depreciated using the straight-line method by both companies
(b) During the year Heuston Ltd paid $15,000 of Training Fees to Strongini Ltd for additional
training required on the specialised equipment purchased from the company. This amount is
disclosed under General Administrative Expenses by Heuston Ltd.
(c) On 1st October 2X15, Strongini sold inventory to Heuston Ltd for $350,000, at a mark-up of
50%. At 30 June 2X16, $75,000 of this inventory was still on hand.
(d) On 28th November 2X14, Heuston Ltd sold some inventory to Strongini Ltd for $90,000, at a
profit before tax of $50,000. This was still on hand in Strongini Ltd at 30 June 2X15, but was
all sold by 30 June 2X16.
(e) Heuston Ltd extended a loan of $100,000 to Strongini Ltd. This loan was issued on the 1st
March 2X14 payable over 5 years, with an interest rate on the loan of 3.5% pa. Interest is paid
on the 1st April and 1st October every year.
(f) A goodwill impairment test in June 2X16 revealed the need to impair goodwill by $5,000.
Impairment of goodwill for prior years amounts to $8,000.
For consolidation purposes the partial goodwill method is used.
(g) All dividends are recognised before receipt of cash.
(h) The corporate income tax rate is 30% and the companies in the group have financial years
from 1
st July to 30 June.
7 | P a g e
Accounts for PART B of the Assignment:
Accounts Heuston Ltd Strongini Ltd
30/06/2X16 30/06/2X16
Balance Sheet Accounts
Cash and Cash equivalents $4,628,890 $1,845,890
Trade Debtors (net) $5,708,250 $1,409,540
Accruals & Other Receivables $1,250,000 $142,960
Short term Cash Investments $2,200,000 $0
Inventory $899,030 $549,410
Goodwill and Other Intangibles $1,022,800 $0
Accumulated Impairment and
 Amortisation of Intangibles -$2,000 $0
Prepayments $2,270,950 $12,490
Loans and Notes Receivable $900,000 $850,000
Motor Vehicles & Truck Fleet $2,018,250 $1,821,040
Accumulated Depreciation - Vehicles -$333,010 -$183,150
Marketable Securities $370,010 $203,500
Investment in Subsidiary $3,200,000 $0
Dividend and Interest Receivable $955,860 $52,570
Trademarks & Patents (net) $17,584,850 $3,671,630
Debentures in Other Companies $2,044,500 $0
Deferred Tax Asset $252,420 $138,320
Property, Plant and Equipment $13,875,460 $2,631,500
Accumulated Depreciation - PPE -$4,625,150 -$526,300
Land $7,247,970 $2,536,380
TOTAL $61,469,080 $15,155,780
Deferred Tax Liability $2,403,040 $599,850
Tax Payable $628,690 $578,220
Dividends Payable (Ordinary Shares) $1,537,450 $125,000
Dividends Payable (Pref Shares) $27,500 $9,000
Trade Creditors $7,010,000 $1,938,300
Other Liabilities & Provisions $2,737,500 $3,401,110
Loans and Notes Payable $900,000 $1,150,000
Debentures (4.5%) $2,368,080 $2,300,000
Issued Share Capital ($1 ORD A shares) $15,374,500 $1,000,000
Issued Share Capital ($1 Preference shares) $550,000 $450,000
General Reserve $5,059,000 $1,703,710
Other Capital Reserve $21,067,990 $1,027,550
Retained Profits (c/b) $1,805,330 $873,040
Total Liabilities & Equity $61,469,080 $15,155,780
8 | P a g e
Accounts for PART B of the Assignment:
Heuston Ltd Strongini Ltd
Profit and Loss Accounts 30/06/2X16 30/06/2X16
Sales and Other Revenue $9,934,100 $3,313,830
Stock at start $555,010 $305,260
Purchases $4,613,700 $1,384,110
Stock at end -$899,030 -$549,410
Cost of Goods Sold $4,269,680 $1,139,960
Gross Profit $5,664,420 $2,173,870
Less Expenses
Expenses from Business Operations $1,235,100 $860,500
General Administration Expenses $808,400 $444,660
Depreciation & Amortisation Expenses $1,750,000 $452,830
Impairment Expenses $415,000 $87,000
Finance Costs $303,600 $15,690
Total Expenses $4,512,100 $1,860,680
Add Other Income
 Dividend and Interest Revenue $1,756,150 $415,880
 Other Income & Disposal of Assets $235,000 $487,500
$1,991,150 $903,380
Net Profit before Tax $3,143,470 $1,216,570
less Income Tax Expense -$628,690 -$578,220
Net Profit after Tax $2,514,780 $638,350
 Add
Retained Profits (o/b) $1,988,490 $713,600
Total Available $4,503,270 $1,351,950
Less Appropriations
Interim Ordinary Dividends Paid $614,980 $60,000
Transfer to General Reserve $518,010 $284,910
Dividends (Preference) Proposed $27,500 $9,000
Dividends (Ordinary) Proposed $1,537,450 $125,000
Total Appropriations $2,697,940 $478,910
Retained Profits (c/b) $1,805,330 $873,040
9 | P a g e
REQUIRED:
Consolidate Heuston Ltd and Strongini Ltd:
(a) Prepare the consolidation journal entries, with narrations, and
consolidated worksheet (using Excel or similar) to consolidate HEUSTON Ltd
and STRONGINI Ltd for the year ended 30th June 2X16.
(b) Produce the completed Consolidated Financial Reports (Statement of
Comprehensive Income and Statement of Financial Position) for the year
ended 30th June 2X16.
In preparing the financial statements for this assignment, you are advised to
comply with AASB standards and the requirements in the Australian
Corporations Legislation when determining the structure and presentation
requirements for the financial reports.
PART B: Submission Instructions (HARD COPY)
:
Part B is to be submitted as a HARD Copy in a Folder.
Include the following:
o A Cover Sheet with names and student ID numbers for all members of the
team
o Consolidation Journal Entries (with all workings clearly shown)
o Consolidation Worksheet (generally as a print-out of an Excel Spreadsheet)
o Consolidated Financial Reports
o One submission per GROUP
o Due Date: Monday 17 OCTOBER 2016 by 5:30pm
(Information about an Assignment Submission Box will be made available closer to the
due date)

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