CONSOLIDATION ASSIGNMENT
The following financial statements of Dandy Ltd and its subsidiary Candy Ltd have been extracted from their financial records at 30 June 2017.
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Dandy Ltd |
Candy Ltd |
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$ |
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$ |
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Reconciliation of opening and |
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Closing retained earnings |
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Sales revenue |
1 000 000 |
750 000 |
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Cost of goods sold |
(600 000) |
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(300 000) |
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Gross profit |
400 000 |
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450 000 |
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Dividends received from Candy Ltd |
100 000 |
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– |
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Management fee revenue |
50 000 |
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– |
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Profit on sale of plant |
50 000 |
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– |
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Expenses |
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Administrative expenses |
(30 000) |
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(40 000) |
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Depreciation |
(30 000) |
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(80 000) |
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Management fee expense |
– |
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(50 000) |
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Other expenses |
(150 000) |
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(80 000) |
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Profit before tax |
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390 000 |
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200 000 |
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Income Tax expense |
(87 000) |
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(75 000) |
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Profit for the year |
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303 000 |
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125 000 |
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Retained earnings- 30 June 2016 |
400 000 |
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325 000 |
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703 000 |
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450 000 |
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Dividends paid |
(153 000) |
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(100 000) |
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Retained earnings – 30 June 2017 |
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550 000 |
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350 000 |
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Balance Sheet |
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Shareholders’ |
Equity |
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Retained earnings |
550 000 |
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350 000 |
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Share capital |
500 000 |
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300 000 |
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Current liabilities |
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Accounts payable |
– |
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210 000 |
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Tax payable |
140 000 |
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40 000 |
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Non-current liabilities |
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Loans |
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310 000 |
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420 000 |
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Current assets |
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1 500 000 |
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1 320 000 |
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Accounts receivable |
50 000 |
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70 000 |
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Inventory |
150 000 |
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450 000 |
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Non-current assets |
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Land and buildings |
300 000 |
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500 000 |
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Plant-at cost |
450 000 |
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500 000 |
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Accumulated depreciation |
(100 000) |
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(200 000) |
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Investment in Candy Ltd |
650 000 |
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– |
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1 500 000 |
1 320 000 |
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Dandy Ltd acquired its 100 per cent interest in Candy Ltd on 1 July 2009. The cost of the
investment was $650 000. At that date the capital and reserves of Candy Ltd were:
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$ |
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Share capital |
300 000 |
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Retained earnings |
200 000 |
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500 000 |
At the date of acquisition all assets were considered to be fairly valued except for the following assets:
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Carrying |
Fair |
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amount |
Value |
Plant (cost $130,000) |
$100,000 |
$110,000 |
Land |
120,000 |
140,000 |
The plant had a further ten-year life, with benefits expected to be received evenly over that period.
During the year Dandy Ltd made total sales to Candy Ltd of $100 000, while Candy Ltd sold $90 000 in inventory to Dandy Ltd.
The opening inventory in Dandy Ltd as at 1 July 2011 included inventory acquired from Candy Ltd for $50 000 that cost Candy Ltd $40 000 to produce.
The closing inventory in Dandy Ltd includes inventory acquired from Candy Ltd at a cost of $50 000. This cost Candy Ltd $35 000 to produce. The closing inventory of Candy Ltd includes inventory acquired from Dandy Ltd at a cost of $20 000. This cost Dandy Ltd $15 000.
The management of Dandy Ltd believe that goodwill acquired was impaired by $6 000 in the current financial year. Previous impairments of goodwill amounted to $20 000.
On July 1, 2011 Dandy Ltd sold an item of plant to Candy Ltd for $200 000 when its carrying value in Dandy Ltd’s accounts was $150 000 (cost $250 000, accumulated depreciation $100 000). This plant is assessed as having a remaining useful life of 4 years.
Candy Ltd paid $50 000 in management fees to Dandy Ltd. The tax rate is 30 per cent.
Using Microsoft Excel you are required to,
CONSOLIDATION WORKSHEET
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Dandy Ltd |
Candy Ltd |
Eliminations |
Consol. |
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( $000) |
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( $000 ) |
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( $000) |
( $000 ) |
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Dr |
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Cr |
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Sales Revenue |
1 000 |
750 |
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Cost of Goods Sold |
600 |
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300 |
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Gross Profit |
400 |
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450 |
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Other Revenue |
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Dividends from Candy |
100 |
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Management Fee Rev. |
50 |
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Profit – sale of Plant |
50 |
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Expenses |
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Administrative Exp |
30 |
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40 |
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Depreciation |
30 |
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80 |
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Management Fee Exp |
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50 |
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Other Exp |
150 |
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80 |
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Profit before tax |
390 |
200 |
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Tax Expense |
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87 |
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75 |
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Profit for Year |
303 |
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125 |
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Retained Earn 30/6/16 |
400 |
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325 |
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703 |
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450 |
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Dividends Paid |
153 |
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100 |
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Retained Earn 30/6/17 |
550 |
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350 |
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CONSOLIDATION WORKSHEET
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Dandy Ltd |
Candy Ltd |
Eliminations |
Consol. |
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($000) |
($000) |
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($000) |
($000) |
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Dr |
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Cr |
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BALANCE SHEET |
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Shareholders Equity |
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Retained Earnings |
550 |
350 |
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Share Capital |
500 |
300 |
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Current Liabilities |
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Accounts Payable |
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210 |
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Tax Payable |
140 |
40 |
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Non Current Liabilities |
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Loans |
310 |
420 |
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Total Equities |
1500 |
1320 |
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Current Assets |
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Accounts Receivable |
50 |
70 |
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Inventory |
150 |
450 |
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Non Current Assets |
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Deferred Tax Asset |
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Land & Buildings |
300 |
500 |
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Plant at cost |
450 |
500 |
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Accum Deprecation |
(100) |
(200) |
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Investment in Candy Ltd |
650 |
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Goodwill |
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Accum Impair Losses |
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Total Assets |
1500 |
1320 |
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