BUACC2603 – Corporate Accounting Semester 1, 2012 ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 1000 words Group Assignment: 2 people Format: Part A - Report Part B - Consolidated...

BUACC2603 – Corporate Accounting Semester 1, 2012 ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 1000 words Group Assignment: 2 people Format: Part A - Report Part B - Consolidated worksheet and journals Part A – (15%) If we look at a reporting entity’s balance sheet we will see a total given for all the entity’s assets (this is a requirement of AASB101). This aggregate total is derived by adding together the various classes of current and non-current assets. Do you think it is appropriate that the various classes of assets are simply added together, even though they have probably been measured on a number of quite different measurements bases? (Deegan, 2010) What does the aggregated total actually represent? Justify your answer by giving examples (e.g. inventory valuation AASB102 and property, plant and equipment AASB116). What alternative/s would you recommend? Assessment criteria 1000 words max. Excellent (HD) Very Good (D) Good (C) Satisfactory (P) Unsatisfactory (F) 1. Introduction (10) 2. Body/Discussion (30) Critical evaluation of topic 3. Conclusion (15) 4. Examples (10) 6. Referencing, citations (5) 7. Evidence of reading, quality and quantity (10) 8. English expression, coherence, grammar and spelling. Logical flow of ideas (10) 90/6 = 15% Part B (10%) Alpha Ltd owns 100% of the shares of Belmont Ltd, acquired on 1 July 2010 for $3.5 million when the shareholders’ funds of Belmont Ltd were: Share Capital 1,750,000 Retained Earnings 1,400,000 3,150,000 All assets of Belmont Ltd are fairly stated at acquisition date. The directors believe that there has been an impairment loss on the goodwill of $35,000 for the year ended 30 June 2011. During the 2011 financial year, Belmont Ltd sells inventory to Alpha Ltd at a sales price of $700,000. The inventory cost Belmont Ltd $420,000 to produce. At 30 June 2011, half of the inventory is still on hand with Alpha Ltd. The tax rate is 30%. The accounts of Alpha Ltd and Belmont Ltd as 30 June 2011 are as follows; Alpha Belmont Eliminations and adjustments Consolidated Company Company Dr Cr Statement $000 $000 $000 $000 $000 Income statement Sales revenue 4 200 1 400 Less: cost of goods sold (1 750) (490) Less: other expenses (210) (105) Other revenue 245 87.5 Profit 2 485 892.5 Tax expense 700 350 Profit after tax 1 785 542.5 Retained earnings 1 July 2010 3 500 1 400 5 285 1 942.5 Dividends paid 700 140 Retained earnings 30 June 2011 4 585 1 802.5 Balance sheet Shareholders’ equity Retained earnings 30 June 2011 4 585 1 802.5 Share capital 14 000 1 750 Current liabilities Accounts payable 350 297.5 Non-current liabilities Loans 2 100 875 21 035 4 725 Current assets Cash 875 87.5 Accounts receivable 525 612.5 Inventory 2 100 1 050 Non-current assets Land 5 040 1 400 Plant 8 645 1 400 Investment in Belmont Ltd 3 500 — Deferred tax asset 350 175 Goodwill 21 035 4 725 Required Prepare the consolidated journals for Alpha Ltd and its controlled entity for 2011 Use the above worksheet and complete the consolidated statement. a. Determine goodwill or gain on acquisition b. Eliminate inter-company sales transaction. c. Eliminate unrealized profit in closing inventory d. Adjust the tax expense for unrealized profit or losses e. Eliminate dividend paid by Belmont to Alpha f. Impair goodwill Each pair of students is to submit a single assignment (essay and consolidate worksheet) for which the two students will usually receive the same mark. This is based on the expectation that each student will contribute equally to the preparation of the assignment. Where this expectation has not been satisfied separate marks may be allocated. Selected students may be invited to discuss their assignment with the person responsible for marking it. This discussion will only be taken into account in marking assignment where it provides evidence that the integrity of students’ work has been compromised. This may, for example, be evidenced by students being unable to explain the meaning of their assignment, or being unable to explain why certain information has been included.