Tim Ltd acquired all the issued capital of Tam Ltd on 1 July 2012 for $3,020,000
ID: 2412559 • Letter: T
Question
Tim Ltd acquired all the issued capital of Tam Ltd on 1 July 2012 for $3,020,000. At that date the shareholders’ equity of Tam Ltd was:
$
Share Capital
2,200,000
Retained Earnings
640,000
Additional information for the year ended 30 June 2014:
(1) Intercompany sales:
(a) Tim Ltd to Tam Ltd $42,000
(b) Tam Ltd to Tim Ltd $36,000
(2) Unrealised profits in closing inventory as at 30 June 2014 is $2,400 for goods sold by Tam Ltd to Tim Ltd and $4,800 for goods sold by Tim Ltd to Tam Ltd.
(3) Unrealised profit in opening inventory for goods sold by Tim Ltd to Tam Ltd as at 1 July 2013 is $2,800 and for goods sold by Tam Ltd to Tim Ltd is $4,200.
(4) Tim Ltd employees provide administration support to Tam Ltd. For these services, Tam Ltd pays an annual fee of $20,000 per annum.
(5) The final dividend of $33,000 declared as at 30 June 2013, was paid by Tam
Ltd in October 2013. An interim dividend was paid in January $28,000. A
final dividend was declared at 30 June, 2014 $40,000.
(6) On 30 June 2014, Tim Ltd purchased a motor vehicle from Tam Ltd for
$30,000. Tam Ltd made profit on this sale of $7,000.
(7) Tam Ltd raised funds from Tim Ltd by issuing $200,000, 8% Debentures on
1 July 2013. The annual interest charge was paid by Tam Ltd 30 June 2014.
(8) The directors review the balance of goodwill each year. They agree that:
(a) For the year ended 30 June 2013, goodwill was impaired by $10,000.
(b) For the year ended 30 June 2014, goodwill is to be impaired by
$40,000. Trial balance of Tim Ltd and Tam Ltd is attached for your information
Required:
Prepare the appropriate consolidated journal entries for 30 June 2014 to record the following transactions in the worksheet provided:
Trial Balance for Tim Ltd & Tam Ltd: 30 June 2014
Tim Ltd
Tam Ltd
Eliminations
Consolidation
Sales
2,970,000
1,650,000
Less: Cost of Sales
Inventory 01/07/2013
240,000
104,000
Purchases
1,250,000
626,000
1,490,000
730,000
Inventory 30/06/2014
230,000
98,000
Cost of Goods Sold
1,260,000
632,000
Gross Profit
1,710,000
1,018,000
Administration support fees
20,000
0
Gain on Sale of Plant
0
7,000
Dividends Received
61,000
0
Interest Received on Debentures
16,000
0
1,807,000
1,025,000
Less: Expenses - Selling Exp.
160,000
71,000
- Admin Exp.
- Financial Exp.
583,000
104,000
847,000
628,000
16,000
715,000
Operating Profit before Tax
960,000
310,000
Less: Tax expense
288,000
93,000
Profit after Tax
672,000
217,000
Retained Earnings 01/07/2013
1,176,000
843,000
Available for Appropriation
1,848,000
1,060,000
Appropriations
Interim dividend paid
160,000
28,000
Final dividend declared
280,000
40,000
Total Appropriations
440,000
68,000
Retained Earnings 30/06/2014
1,408,000
992,000
Share Capital
4,000,000
2,200,000
8% Debentures
0
200,000
Accounts Payable
144,000
72,000
Final Dividends Payable
280,000
40,000
Taxation Payable
188,000
50,000
6,020,000
3,554,000
Property, Plant & Equip (net)
1,464,000
1,800,000
Shares in Tam Ltd
3,020,000
0
8% Debentures
200,000
0
Other Non-Current Assets
650,000
1,300,000
Inventory
230,000
98,000
Other Current Assets
456,000
356,000
Goodwill on Consolidation
6,020,000
3,554,000
Use the following format:
Tim & Tam Ltd
General Journal
Consolidated worksheet for Tim Ltd & Tam Ltd as at 30 June 2014
Tim Ltd
Tam Ltd
Eliminations
Consolidation
Sales
2,970,000
1,650,000
Less: Cost of Sales
Inventory 01/07/2013
240,000
104,000
Purchases
1,250,000
626,000
1,490,000
730,000
Inventory 30/06/2014
230,000
98,000
Cost of Goods Sold
1,260,000
632,000
Gross Profit
1,710,000
1,018,000
Administration support fees
20,000
0
Gain on Sale of Plant
0
7,000
Dividends Received
61,000
0
Interest Received from Tam ltd
16,000
0
1,807,000
1,025,000
Less: Expenses - Selling Exp.
160,000
71,000
- Admin Exp.
583,000
628,000
- Financial Exp.
104,000
16,000
847,000
715,000
Operating Profit before Tax
960,000
310,000
Less: Tax expense
288,000
93,000
Profit after Tax
672,000
217,000
Retained Earnings 01/07/2013
1,176,000
843,000
Available for Appropriation
1,848,000
1,060,000
Appropriations
Interim Dividend paid
160,000
28,000
Final Dividend declared
280,000
40,000
Total Appropriations
440,000
68,000
Retained Earnings 30/06/2014
1,408,000
992,000
Share Capital
4,000,000
2,200,000
8% Debentures
0
200,000
Accounts Payable
144,000
72,000
Final Dividends Payable
280,000
40,000
Taxation Payable
188,000
50,000
6,020,000
3,554,000
Property, Plant & Equip (net)
1,464,000
1,800,000
Shares in Tam Ltd
3,020,000
0
8% Debentures in Tam
200,000
0
Other Non-Current Assets
650,000
1,300,000
Inventory
230,000
98,000
Other Current Assets
456,000
356,000
Goodwill on Consolidation
6,020,000
3,554,000
$
Share Capital
2,200,000
Retained Earnings
640,000
Explanation / Answer
Tim & Tam Ltd General Journal 30, June, 2014 consolidated Profit and Loss 7000 Inventory (opening) 7000 (Common Profits Elimineted) consolidated Profit and Loss 7200 Inventory (Closing) 7200 (Common Profits Elimineted) consolidated Profit and Loss 20000 Administration Support Fees 20000 (Common Profits Eliminited) consolidated Profit and Loss 7000 Property, Plant & Equipment 7000 (Common Profits Eliminited) 8% Debentures (Tam Ltd) 200000 8% Debentures (TIMLtd.) 200000 (Common Investment and Liabilities Elimineted) Final Dividend Payble (TAM Ltd.) 40000 other Current Assets (TIM Ltd.) 40000
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