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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 entitys balance sheet we will see a total given for all the entitys 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
Very Good
Good
Satisfactory
Unsatisfactory
(HD)
(D)
(C)
(P)
(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;
Eliminations and
Alpha
Belmont
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.
