CLEANED: Maa 716 Assignment Proforma ✓ Solved

CLEANED: Maa716 Assignment Proforma

Maa716 Assignment Proforma

MAA716 Assignment proforma Trimester 1 2016 Assignment – Part C Name: Student ID: Section One - Consolidation Journal Entries (Please note: feel free to add more rows if needed) Date Details Debit Credit Section Two - Concept of Control 1 of 2 MAA716 Financial Accounting Assignment – Part C T marks/13%) This assessment task is designed to test a student’s achievement of learning objectives set in MAA716 Unit Guide. It is an individual assessment task. This assignment must be submitted for the successful completion of this unit. It will count to a maximum of 13% towards the final mark. The Assignment Part C is consisted of two sections: Section One (27 marks) – Consolidation (Journal entries) Section Two (8 marks) – Concept of control (Theoretical discussion) You will need to have completed Topics 8 and 9 to complete this assignment.

Submission Assignment Part C is due 5:00pm, Monday 23 May 2016 (Week 11). The completed assignment must be submitted into the allocated area in CloudDeakin under the Dropbox folder. The Dropbox will remain open for late submission. A penalty of 30% per day will be applied to late submission. When uploading your assignment, give the document a name using the following syntax: <MAA716 Assignment Part C, T1 2016.doc (or ‘.docx’), followed by student name and ID.

You must type your answer in the proforma provided. If the proforma is not used, your submission will not be marked. Should you requires a time extension in relation to this assignment, you need to contact the Unit Chair via email ( [email protected] ) prior 1 mailto: [email protected] to the due date of the assignment, supported by documentation, e.g. medical certificate. No extension will be granted if you don’t provide supporting documents. Please note that extensions will only be given for exceptional and unusual circumstances outside the student’s control.

The final examination is the only hurdle requirement for the unit. If you choose not to submit this assignment you will be scored zero. There is no provision for the mark to be added to the final exam mark. Releasing of result and suggested solution Suggested solution will be released to CloudDeakin on Friday 27 May, 2016 (Week 11). We will try our best to return marks to you asap, in order to help you with your final exam preparation.

Please monitor CloudDeakin announcement. CloudDeakin discussion A particular discussion forum for the Assignment Part C has been created in CloudDeakin to facilitate peer discussion. Feel free to post queries if you need to seek further clarification from teaching staff. CloudDeakin discussion forum however is not an area for the answer to be shared among students. A note on plagiarism and collusion Plagiarism and collusion are forms of cheating and is considered a serious academic misconduct, and severe penalties are associated with them.

Please refer to the MAA716 Unit Guide for your responsibilities with regard to plagiarism and other academic offences. 2 Section One Consolidation Journal Entries Dean Ltd acquired all the issued share capital of Diane Ltd on 1 January 2012 for cash $200,000. On the acquisition date, the equity of Diane Ltd is consisted of: • Share capital - $125,000 • General reserve - $31,250 • Retained earnings - $25,000 All the identifiable assets and liabilities of Diane Ltd were recorded at fair value except for some depreciable plant and machinery, which had a carrying amount of $106,250 (cost $125,000) and fair value of 112,500. The remaining useful life was 10 years. The fair value adjustments would be made on consolidation rather than on Diane’s own accounting book.

Additional information shows: 1. During the current period, Dean Ltd sold inventory to Diane Ltd for $25,000. This had originally cost Dean Ltd $22,750 to manufacture. By 31 December 2016, Diane sold half of the inventory to Brit Ltd for $15,388. 2. Dean Ltd’s opening inventory includes inventory purchased from Diane Ltd for $109,000. The inventory had originally costed Diane Ltd $89,000 to purchase. 3. At 1 January 2016, Diane Ltd sold a machine to Dean Ltd for $180,000. This item had a carrying amount at time of sale to Diane Ltd of $120,000 (original cost $200,000, accumulated depreciation $80,000). The remaining useful life of the machine is 12 years for both entities. 4. Dean Ltd provided computer services cost $36,000 to Diane Ltd during the current financial year. At 31 December 2016, $3,000 remained unpaid. 5. On 1 January 2015, Diane Ltd sold a plant to Dean Ltd for $22,000. Diane Ltd recorded a profit of $8,000 before tax. The remaining useful life was 10 years at the time of this intra-group transaction. . Diane Ltd declared final dividend of $10,000 from its current year’s profit. 7. Goodwill had been impaired by 10% in the first year following the acquisition. During the year ended 31 December 2016 it was considered that the goodwill has been further impaired by an amount of $3,000. 8. The tax rate is 30%. Required: Prepare all necessary consolidation adjusting journal entries for the year ended 31 December 2016, according to the requirements of AASB 10 Consolidation Financial Statements (no narrations required for journal entries), assuming the financial year for Dean Ltd and Diane Ltd is as same as the calendar year.

Sample Paper For Above instruction

Consolidation of financial statements involves the integration of financial data of a parent company and its subsidiaries to present a unified financial position. The process requires intricate adjustments to account for intra-group transactions, unrealized profits, asset revaluations, and impairment considerations, adhering to standards such as AASB 10. In this paper, the necessary consolidation journal entries for Dean Ltd and Diane Ltd for the year ended 31 December 2016 will be systematically prepared, considering the provided data and relevant accounting principles.

Introduction

The consolidation process aims to provide a true and fair view of the group’s financial performance and position, eliminating intra-group balances and transactions to prevent double counting. Under AASB 10, control is the primary consideration, which determines whether a subsidiary should be consolidated. The complexities in this case stem from intra-group sales of inventory and machinery, fair value adjustments, unrealized profits, and impairment of goodwill, all of which need to be meticulously adjusted in the consolidation journal entries.

Initial Acquisition and Fair Value Adjustments

On 1 January 2012, Dean Ltd acquired Diane Ltd for $200,000 in cash. Diane Ltd’s equity at acquisition comprised share capital of $125,000, a general reserve of $31,250, and retained earnings of $25,000. The fair value of net assets included fair value adjustments, particularly for plant and machinery, which had a carrying amount of $106,250 and a fair value of $112,500. An excess fair value over the book value indicates an upward adjustment in asset valuation, which should be recorded in the consolidation entries.

Adjustment for Fair Value of Plant and Machinery

The fair value adjustment is calculated as $112,500 minus the carrying amount of $106,250, resulting in a $6,250 increase. This adjustment would be debited to the specific asset account and credited to a revaluation reserve or to the consolidation reserve if applicable, with tax effects considered in the journal entries.

Intra-Group Transactions and Profit Eliminations

The intra-group sales of inventory amounting to $25,000, with a cost basis of $22,750, result in unrealized profits that must be eliminated. When half of the inventory has been sold to third parties, the unrealized profit on the remaining inventory (at year-end) needs to be recognized and adjusted. The profit on inventory transfer must be deferred proportionally based on remaining inventory unsold at year-end.

Machinery and Asset Sale Adjustments

Sale of machinery at a profit of $60,000 (sale price $180,000 minus carrying amount of $120,000) requires the elimination of the intra-group profit. The subsequent depreciation on the fair value adjustment must also be adjusted over the useful life (12 years). Similarly, plant sale adjustments involve eliminating profit and adjusting for remaining useful life.

Deferred Revenue and Payables

The services provided worth $36,000 with $3,000 unpaid at year-end create receivables and revenue that need to be recognized, and any inter-company balances must be eliminated or adjusted accordingly in the consolidation.

Impairment of Goodwill

Goodwill impairment of $3,000 during the year reduces the carrying amount of goodwill. This impairment must be recorded in the consolidation journal entries, affecting the goodwill account and possibly deferred tax assets/liabilities depending on the tax effects.

Dividends and Equity Adjustments

The declared dividend of $10,000 reduces retained earnings and must be eliminated from the group accounts to prevent double counting of profits. The proportion of dividend attributable to the parent should be reflected in the consolidation entries.

Tax Considerations

Tax effects of fair value adjustments, impairment, and intra-group profits eliminated are calculated at the 30% tax rate, impacting the deferred tax assets or liabilities recognized in the consolidation journal entries.

Conclusion

Preparation of consolidation journal entries requires detailed analysis of intra-group transactions, fair value adjustments, and impairment considerations to produce accurate consolidated financial statements, complying with AASB 10 requirements. The entries systematically eliminate unrealized profits, adjust asset values, record impairment, and recognize tax effects, ensuring the group’s financial reporting accurately reflects the economic reality of the consolidated entity.

References

• Australian Accounting Standards Board (AASB). (2014). AASB 10 Consolidated Financial Statements.
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