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ACCT6005 Company Accounting Assessment 3 Case Study

Part A: This case study assignment help is designed to assess your understanding and application of knowledge using a practical case study to analyse and prepare relevant worksheet entries and financial statements for a Group.

Submission Instructions: Part A: • Submit Part A of the assessment document in a Word format and excel (see assessment question) including a coversheet. JPEG files or similar cannot be opened and will not be marked. • Submit via the Assessment link in the main navigation menu in ACCT6005 Company Accounting.

 

 

ACCT6005 Company accounting Assessment 3 Case study Part A

Assignment instructions: This assignment is to be completed using Microsoft word for the evaluation report (part a) and Excel for the entries, worksheet and Group financial statements (part b, c, d). Please use a separate sheet in excel for each separate part b, c and d.

Please ensure that your file name contains your student ID and your full name. Please ensure that you use the ‘Ref’ column in the worksheet to identify each separate consolidation entry. 

Case study:

PART A (100 Marks)

Grape Ltd acquired all the issued shares of Duck Ltd for $940 000 cash on 1 July 2020.

The following information is available at this acquisition date:

The equity of Duck Ltd is provided below:
 

Share capital

$495 000 00000

Retained earnings

280 000

General reserve

125 000

 

All the identifiable assets and liabilities of Duck Ltd were recorded at fair value in the statement of financial position. The company income tax rate is 30%.

The following transactions and events occurred during the year ended 30 June 2021:

1. During the year Grape Ltd sold inventory to Duck Ltd for $55,000 at cost plus 20%. Duck Ltd has sold 10% of these items externally as at 30 June 2021.

2. On 1 April 2021, Duck Ltd sold an item of inventory to Grape Ltd for $28,000. This inventory had cost Duck Ltd $20,000. Grape Ltd treated the item as plant and will depreciate it at 20% p.a.

3. Grape Ltd sold land to Duck Ltd for $25,000 which had originally cost $32,000.

4. Dividends: Duck Ltd paid $18 000 interim dividends in September 2020, and Grape Ltd declared $26 000 dividends in May 2021 (to be paid in October 2021).

5. On 1 July 2020, Grape Ltd provided an office for Duck Ltd’s administrative staff to use. Grape Ltd charges $700 per month. The last rental receipt received by Grape Ltd was on 30 April 2021.

Required:

Part (a) (36 marks)

Analyse the completed worksheet attached for the Grape group. Using the information provided in the worksheet, prepare an evaluation report in word, detailing each omission and error. For each error:

1. List the accounts and amounts, which are incorrect for each consolidation adjustment.

2. Explain WHY the entry is incorrect. Include formulas where possible in your explanation.

 

 

Part (b) Prepare the consolidation entries as at 30 June 2021 in excel using the template below. Include narrations for each entry: (28 marks)

 

Date

Particulars

Reference

Debit

Credit

 

 

 

 

 

 

 

 

 

 

 

Part (c): Worksheet (24 marks)


Using excel, prepare the consolidation worksheet as at 30 June 2021, showing all entries including the corrected entries discussed in Part (a). Each entry needs to be entered as a separate amount and not entered as subtotals in the worksheet. Round your answers to zero decimal places. The worksheet template is provided below.

Part (d): Group financial statements (12 marks)

Using excel, prepare the Statement of Financial position for Grape Ltd as at 30 June 2021.

Solution


Part (a)

An acquisition can be defined as the difference between the price paid by the acquirer for purchasing another company and the original cost of the assets of the target company (Janice 2013).
Following entries or transaction is incorrect

Reference 1:

Adjustment in Share capital, general reserve, retained earning & BCVR is incorrect and not required.

Reference 2:

Sales revenue- The amount of $25,000 debited in the sales account and $ 22,000 credited in the cost of sales account is incorrect- because for unsold stock with Duck Ltd, to eliminate the unrealised profit of Grape Ltd. the sales should have been debited with $8250 and Inventories should have been credited with $8250

Reference 3:

Adjustment entry done in Proceeds from sales of equipment and carrying amount of sold equipment, the related depreciation & entry done in equipment ledger in asset side is incorrect. Since Duck has treated Inventory and sold to Grape for $28,000 which cost Duck ltd $20,000 Therefore, the sales account of Duck should have been debited to a tune of $8000 and Depreciation account needs to be credited by $8000*20%= $1600 (which is excess on account of group sales) and the carrying amount of the equipment plant) needs to be reduced by net $6400 to eliminate the effect of the sales.

Reference 4:

All the adjustment relating to reference 4 needs to be removed since the dividend entry has already been correctly recorded no further adjustment required. Since Duke ltd (subsidiary of Grape Limited) pays interim dividend so its post-acquisition profit so it should be recorded in the profit and loss of Grape Limited and the same has been correctly recorded (AASB 2021)

Reference 5:

The adjustment for service expenses of $90,000 is incorrect as we need to just eliminate the outstanding and payable rent expenses which are for 2 months @$700 per month. Thus the correct adjustment should be debiting other payables account and crediting other receivables account to the tune of $1400

Reference 6:

Sales of land by Grape Ltd to Duck Ltd. for $25,000 cost $32,000. Thus, the unrealised loss of $7000 needs to be eliminated.

Herein the application of AASB 10 is observed because it develops the principles for preparation, as well as presentation of the consolidated financial statement when the entity has a control over one or more than one entities (AASB 2021)

Part b)

Part c)

 

Part d)

 Consolidated Financial Statement of Duck Ltd

References

AASB. (2021) AASB Standard. Retrieved from https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf

Janice, L. (2013). Understanding Australian Accounting Standards. Milton, Qld.: John Wiley and Sons. Retrieved from https://lesa.on.worldcat.org/oclc/807180288

Potter, B., Howieson, B., & Chapple, E. (2019). Accounting standards setting. Emerald Publishing Limited. Retrieved from https://lesa.on.worldcat.org/oclc/1113886538



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