Acct209 Lotus Limited Statement Assessment Answers
- Lotus Limited acquired the shares in Troy Limited at 1 January 2018, buying the 10000 shares in Troy Limited for $40000. At that date, Troy Limited recorded share capital of $20000. The shares were bought on a cum div Troy Limited had declared prior to the acquisition a dividend of $6000 that was paid in March 2018.
- At 1 January 2018, all identifiable assets and liabilities of Troy Limited were recorded at fair value, except for inventories, for which the carrying amount was $800 less than fair value. A number of inventories have been difficult to sell, and 10% of it is still in hand at 31 December 2018.
- Inventories on hand in Troy Limited at 31 December 2018 also include some items acquired from Lotus Limited during the period ended 31 December 2018. These were sold by Lotus Limited for $10000, at a profit before tax of $2000.
- Half of the goodwill was written off as the result of an impairment test on 31 December 2018.
- During March 2018, Lotus Limited provided management services to Troy Limited at a fee of $1000 paid by 31 December 2018.
- On 1 July 2018, Troy Limited sold machinery to Lotus Limited at a gain of $4000. This machinery had a carrying amount to Troy Limited of $40000. Lotus considered that this machinery had a 5 year life.
- By 31 December 2108, the financial assets acquired by Lotus Limited and Troy Limited from external entities increased $2000 and $1300 respectively, with gains and losses being recognised in other comprehensive income.
- The TAX RATE is 30%
REQUIRED
- Prepare the acquisition analysis as at 1 January 2018.
- Prepare the business combination valuation entries and pre-acquisition entries as at 1 January 2018.
- Prepare the business combination valuation entries and pre-acquisition at 31 December 2018.
- Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2018.
- Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 31 December 2018.
- Prepare the consolidated statement of profit or loss and other comprehensive income for Lotus Limited and its subsidiary, Troy limited, at 31 December 2018.
Answer:
| Sales Revenue | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Sales Revenue of Lotus Limited | 50000 | ||
| 2 | Sales Revenue of Troy Limited | 47200 | ||
| 3 | Less : Inter company sales | -10000 | ||
| 4 | Sales to be reported | 87200 | ||
| Dividend Revenue | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Dividend Revenue of Lotus Limited | 2000 | ||
| 2 | Less: Intercompany Dividend | -2000 | ||
| 3 | Dividend Revenue to be reported | 0 | ||
| Gain on Sales of Property and Equipment | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Gain of Lotus Limited | 4000 | ||
| 2 | Gain of Troy Limited | 2000 | ||
| 3 | Less Gain on intercompany sale | -4000 | ||
| 4 | Gain on Sales of Property and Equipment to be reported | 2000 | ||
| Other Income | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Other Income of Lotus Limited | 2000 | ||
| 2 | Other Income of Troy Limited | 4000 | ||
| 3 | Less: Intercompany Service | -1000 | ||
| 4 | Other Income to be reported | 5000 | ||
| Cost of Sales | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Lotus Limited | 42000 | ||
| 2 | Troy Limited | 36000 | ||
| 3 | Less: Intercompany Purchase | -10000 | ||
| 4 | Cost of Sales to be reported | 68000 | ||
| Other Expenses | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Lotus Limited | 6000 | ||
| 2 | Troy Limited | 2000 | ||
| 3 | Cost of other expense to be reported | 8000 | ||
| Impairment | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Goodwill Impairment | 3770 | ||
| 2 | Reported figure | 3770 | ||
| Inventory Loss | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Reduction in inventory value | 800 | ||
| 2 | Reported figure | 800 | ||
| Consolidated Profit and Loss Account | ||||
| For 31st December, 2018 | ||||
| Sl No | Particulars | Notes | Amount | Amount |
| Continuing Operations | ||||
| 1 | Revenue | 1 | 87200 | |
| 2 | Cost of sales | 2 | 68000 | |
| 3 | Gross Profit | 19200 | ||
| 4 | Distribution Cost | |||
| 5 | Administration Expense | |||
| 6 | Other Expense | 3 | -12570 | |
| 7 | Other Income | 4 | 5000 | |
| 8 | Other Gain | 5 | 2000 | |
| 9 | Profit before Income Tax | 13630 | ||
| 10 | Income Tax Expense | 4089 | ||
| 11 | Profit from Continuing Operations | 9541 | ||
| Assumption: Depreciation has not been charged initially on asset transferred intercompany | ||||
| Statement of Comprehensive Income | ||||
| For 31st December, 2018 | ||||
| Sl No | Particulars | Notes | Amount | Amount |
| Other comprehensive Income | ||||
| 1 | Changes in fair value of available for sale asset | 6 | 3300 | |
| 2 | Income Tax Expense | 990 | ||
| 3 | Other comprehensive income for the period net of taxes | 2310 | ||
| Notes | ||||
| Note 1 | ||||
| Sales Revenue | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Sales Revenue of Lotus Limited | 50000 | ||
| 2 | Sales Revenue of Troy Limited | 47200 | ||
| 3 | Less : Inter company sales | -10000 | ||
| 4 | Sales to be reported | 87200 | ||
| Note 2 | ||||
| Cost of Sales | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Lotus Limited | 42000 | ||
| 2 | Troy Limited | 36000 | ||
| 3 | Less: Intercompany Purchase | -10000 | ||
| 4 | Cost of Sales to be reported | 68000 | ||
| Note 3 | ||||
| Other Expenses | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Lotus Limited | 6000 | ||
| 2 | Troy Limited | 2000 | ||
| 3 | Cost of other expense to be reported | 8000 | ||
| Impairment | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Goodwill Impairment | 3770 | ||
| 2 | Reported figure | 3770 | ||
| Inventory Loss | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Reduction in inventory value | 800 | ||
| 2 | Reported figure | 800 | ||
| Total | 12570 | |||
| Note 4 | ||||
| Other Income | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Other Income of Lotus Limited | 2000 | ||
| 2 | Other Income of Troy Limited | 4000 | ||
| 3 | Less: Intercompany Service | -1000 | ||
| 4 | Other Income to be reported | 5000 | ||
| Note 5 | ||||
| Gain on Sales of Property and Equipment | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Gain of Lotus Limited | 4000 | ||
| 2 | Gain of Troy Limited | 2000 | ||
| 3 | Less Gain on intercompany sale | -4000 | ||
| 4 | Gain on Sales of Property and Equipment to be reported | 2000 | ||
| Note 6 | ||||
| Changes in fair value of available for sale asset | ||||
| Sl No | Particulars | Amount | Amount | |
| 1 | Gain of Lotus Limited | 2000 | ||
| 2 | Gain of Troy Limited | 1300 | ||
| 3 | Reported Figure | 3300 | ||
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