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

Answer 1

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