Rule Ltd acquired all the issued capital of Book Ltd on 1 July 2014 for $1,500,0
ID: 2557420 • Letter: R
Question
Rule Ltd acquired all the issued capital of Book Ltd on 1 July 2014 for $1,500,000. At that date the shareholders' equity of Book Ltd was:
Share Capital $1,100,000
Retained Earnings $ 300,000
Additional information for the year ended 30 June 2016:
Inter-company sales:
Rule Ltd to Book Ltd $11,000
Book Ltd to Rule Ltd $19,000
Unrealised profits in closing inventory as at 30 June 2016 is $2,400 for goods sold by Book Ltd to Rule Ltd and $1,200 for goods sold by Rule Ltd to Book Ltd.
Unrealised profit in opening inventory for goods sold by Rule Ltd to Book Ltd as at 1 July 2015 is $2,100 and for goods sold by Book to Rule is $1,400.
Rule Ltd employees provide legal advice to Book Ltd. For these services, Book Ltd pays an annual fee of $8,000 per annum.
The final dividend of $16,500, declared as at 30 June 2015, was paid by Book Ltd in October 2015.
An interim dividend of $14,000 was paid on 31 January and a final dividend was declared $20,000 at 30 June, 2016.
On 30 June 2016, Rule Ltd purchased a motor vehicle from Book Ltd for $15,000. Book Ltd made profit on this sale of $3,500.
Book Ltd raised funds from Rule Ltd by borrowing $100,000 at an interest rate of 10% per annum. The annual interest charge was paid by Book Ltd on 30 June 2016.
The directors review the balance of goodwill each year. They agree that for the year ended 30 June 2016, goodwill is to be unpaired by $20,000.
Please complete a Consolidated Worksheet
Consolidation Worksheet 30
June 2016
Rule
Ltd
Book
Ltd
Eliminations
Dr Cr
Consolidated
Accounts
Sales
1,485,000
825,000
Less Cost of Sales
Inventory 01/07/2015
120,000
52,000
Purchases
625,000
313,000
745,000
365,000
Inventory 30/06/2016
115,000
49,000
Cost of Goods Sold
630,000
316,000
Gross Profit
855,000
509,000
Legal fees received
8,000
0
Gain on sale of plant
0
3,500
Dividends received
30,500
0
Interest received from Book Ltd
10,000
0
903,500
512,500
Less: Expenses - selling expenses
80,000
35,500
- Admin expenses
291,500
314,000
- Financial expenses
52,000
8,000
423,500
357,500
Operating profit before tax
480,000
155,000
Less tax expense
144,000
46,500
Profit after tax
336,000
108,500
Retained earnings 01/07/2015
588,000
421,500
Available for appropriation
924,000
530,000
Appropriations
Interim dividend paid
80,000
14,000
Final dividend declared
140,000
20,000
Total appropriations
220,000
34.000
Retained earnings 30/06/2016
704,000
496,000
Share capital
2,000,000
1,100,000
Loan from Rule Ltd
0
100,000
Accounts payable
72,000
36,000
Dividends payable
140,000
20,000
Taxation Payable
94,000
25,000
3,010,000
1,777,000
Property, Plant & Equip (net)
732,000
900,000
Shares in Book Ltd
1,500,000
0
Loan to Book Ltd
100,000
0
Other non-current assets
335,000
650,000
Inventory
115,000
49,000
Other current assets
228,000
178,000
Goodwill on consolidation
3,010,000
1,777,000
Consolidation Worksheet 30
June 2016
Rule
Ltd
Book
Ltd
Eliminations
Dr Cr
Consolidated
Accounts
Sales
1,485,000
825,000
Less Cost of Sales
Inventory 01/07/2015
120,000
52,000
Purchases
625,000
313,000
745,000
365,000
Inventory 30/06/2016
115,000
49,000
Cost of Goods Sold
630,000
316,000
Gross Profit
855,000
509,000
Legal fees received
8,000
0
Gain on sale of plant
0
3,500
Dividends received
30,500
0
Interest received from Book Ltd
10,000
0
903,500
512,500
Less: Expenses - selling expenses
80,000
35,500
- Admin expenses
291,500
314,000
- Financial expenses
52,000
8,000
423,500
357,500
Operating profit before tax
480,000
155,000
Less tax expense
144,000
46,500
Profit after tax
336,000
108,500
Retained earnings 01/07/2015
588,000
421,500
Available for appropriation
924,000
530,000
Appropriations
Interim dividend paid
80,000
14,000
Final dividend declared
140,000
20,000
Total appropriations
220,000
34.000
Retained earnings 30/06/2016
704,000
496,000
Share capital
2,000,000
1,100,000
Loan from Rule Ltd
0
100,000
Accounts payable
72,000
36,000
Dividends payable
140,000
20,000
Taxation Payable
94,000
25,000
3,010,000
1,777,000
Property, Plant & Equip (net)
732,000
900,000
Shares in Book Ltd
1,500,000
0
Loan to Book Ltd
100,000
0
Other non-current assets
335,000
650,000
Inventory
115,000
49,000
Other current assets
228,000
178,000
Goodwill on consolidation
3,010,000
1,777,000
Explanation / Answer
Consolidation Worksheet 30
Rule
Book
Eliminations
Consolidated
Jun-16
Ltd
Ltd
Dr Cr
Accounts
Sales
1,485,000
825,000
30000
2,280,000
Less Cost of Sales
Inventory 01/07/2015
120,000
52,000
2100
1400
172,700
Purchases
625,000
313,000
938,000
745,000
365,000
Inventory 30/06/2016
115,000
49,000
1200
2400
162,800
Cost of Goods Sold
630,000
316,000
928,100
Gross Profit
855,000
509,000
1,351,900
Legal fees received
8,000
0
8,000
Gain on sale of plant
0
3,500
3,500
Dividends received
30,500
0
30,500
Interest received from Book Ltd
10,000
0
10,000
903,500
512,500
1,403,900
Less: Expenses - selling expenses
80,000
35,500
115,500
- Admin expenses
291,500
314,000
605,500
- Financial expenses
52,000
8,000
60,000
423,500
357,500
781,000
Operating profit before tax
480,000
155,000
622,900
Less tax expense
144,000
46,500
190,500
Profit after tax
336,000
108,500
432,400
Retained earnings 01/07/2015
588,000
421,500
1,009,500
Available for appropriation
924,000
530,000
1,441,900
Appropriations
Interim dividend paid
80,000
14,000
94,000
Final dividend declared
140,000
20,000
160,000
Total appropriations
220,000
34000
254,000
Retained earnings 30/06/2016
704,000
496,000
3300
3800
1,187,400
Share capital
2,000,000
1,100,000
20000
100000
3,180,000
Loan from Rule Ltd
0
100,000
100,000
Accounts payable
72,000
36,000
108,000
Dividends payable
140,000
20,000
160,000
Taxation Payable
94,000
25,000
119,000
3,010,000
1,777,000
4,817,000
Property, Plant & Equip (net)
732,000
900,000
1,632,000
Shares in Book Ltd
1,500,000
0
1,500,000
Loan to Book Ltd
100,000
0
100,000
Other non-current assets
335,000
650,000
985,000
Inventory
115,000
49,000
164,000
Other current assets
228,000
178,000
50000
356,000
Goodwill on consolidation
80000
80,000
3,010,000
1,777,000
4,817,000
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