Essay about Consolidation Worksheet & Financial Statements

1213 Words Sep 23rd, 2011 5 Pages
On 1 July 2007, Kwok Ltd acquired all the shares of Chu Ltd. Additional information:
(a) At 1 July 2007, all identifiable assets and liabilities of Chu Ltd were recorded at fair values except for inventory, and plant and machinery. The fair value of inventory was $1,000 greater than its carrying amount. This inventory was all sold to external parties in the year ending 30 June 2009. At acquisition date, Chu Ltd had plant & machinery which had a carrying amount of 15,000 and fair value of 16,000. The original cost of this plant and machinery was $17,000. This plant and machinery, which had a further 5 year life at acquisition date, was sold on 1 January 2009. At 1 July 2007, Chu Ltd had an unrecorded patent with an indefinite useful
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(e) During the 2008-2009 year, Kwok Ltd sold inventory to Chu Ltd for $40 000, at a mark-up of cost plus 25%. At 30 June 2009, $10,000 worth of inventory is still held by Chu Ltd.
(f) On 1 January 2009, Chu Ltd sold an item of inventory to Kwok Ltd which planned to use it as a non-current asset, depreciable at 10% p.a. on cost. Kwok Ltd paid $30 000 for this item, with Chu Ltd having manufactured it at a cost of $24 000.
(g) In the 2008-09 year, Kwok Ltd sold inventory for $10 000 which had been sold to it by Chu Ltd in June 2008. The inventory originally cost Chu Ltd $6000 and was sold to Kwok Ltd for $9000.
(h) Kwok Ltd recorded depreciation of $10 000 on plant and machinery sold to it by Chu Ltd on 1 January 2008. The plant and machinery had a carrying amount in Chu Ltd at the date of sale of $80 000. Both entities apply a depreciation rate of 10% p.a. on a straight line basis for this type of plant and machinery.
(i) The Other Equity account relates to available-for-sale financial assets. For the 2008-2009 year, Kwok Ltd recorded an increase in these assets of $3 000, and Chu Ltd recorded a decrease of $2 000. There is no movement of available-for-sale financial assets in the year ending 30 June 2008.
(j) The tax rate is 30%.
(k) Shareholder approval is not required in relation to dividends.

On 30 June 2009 the trial balances of Kwok Ltd and Chu Ltd were as follows: Kwok Ltd

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