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  1. 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 basis. Troy Limited had declared prior to the acquisition a dividend of $6000 that was paid in March 2018.
  2. 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.
  3. 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.
  4. Half of the goodwill was written off as the result of an impairment test on 31 December 2018.
  5. During March 2018, Lotus Limited provided management services to Troy Limited at a fee of $1000 paid by 31 December 2018.
  6. 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.
  7. 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.
  8. The TAX RATE is 30%

REQUIRED

  1. Prepare the acquisition analysis as at 1 January 2018.
  2. Prepare the business combination valuation entries and pre-acquisition entries as at 1 January 2018.
  3. Prepare the business combination valuation entries and pre-acquisition at 31 December 2018.
  4. Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2018.
  5. Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 31 December 2018.
  6. Prepare the consolidated statement of profit or loss and other comprehensive income for Lotus Limited and its subsidiary, Troy limited, at 31 December 2018.

MARKING CRITERIA
QUESTIONS CRITERIA MAXIMUM MARKS GROUP MARKS

  1. Acquisition analysis

Calculations including Goodwill 5

  1. Business combination and pre-acquisition entries

Journal entries and supporting discussion 10

  1. Business combination and pre-acquisition entries

Journal entries 15

  1. Elimination of intragroup transactions

Journal entries-Dividend Paid, Sales of Inventories, Management Services, Sale of Machinery, Depreciation of Machinery and supporting discussion and analysis 20

  1. Consolidated worksheet for Lotus Limited and Troy Limited

Table format for Lotus Limited, Troy Limited including adjustments and Group Consolidation 20

  1. Consolidated Statement of Profit or Loss and other Comprehensive Income

Preparation of Consolidated Statement of Profit or Loss and other Comprehensive Income 10 TOTAL MARKS 80 ASSIGNMENT GROUP MARK DIVIDE BY 4 20
Ensure that you provide full calculations and proper journal entries, including dates. Support the questions as applicable with discussion and analysis.
Assignment must be typed, supported by references and accounting standards.

Attachments:

acct209-ga201….docx