ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
ASSIGNMENT SOLUTIONS
Note:
This assignment is due online by 6pm* on Friday 12th October 2018.
*Do not submit at exactly 6pm as it will be recorded as being late and it will not be accepted for marking.
It is your responsibility to ensure the Assignment 4 Answer Booklet is successfully submitted
on time, the format is not changed, and it is downloadable and readable by the ACCTG 211
markers.
QUESTION 1 Part A
(a) Notional journal entry on 1 April 2002 and 31 March 2018
Your workings must be shown on each line of the notional journal entry below:
Dr Share capital
380 000 x 70%
$
266 000
Dr REs
200 000 – 35 000 contingent liability effect = 165,000 x 70%
115 500
Dr ARS
Zero + BV to FV 90 000 (330 000 BV – 420 000 FV) + 178 000 IA
= 268 000 x 70%
Dr Goodwill
187 600
$
80 900
Cr Investment in Subsidiary
650 000
1
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
Question 1 Part A continued:
(b) Notional journal entry on 1 April 2002 only
Your workings must be shown on each line of the notional journal entry below:
Dr Share capital
380 000 x 30%
$
114 000
Dr REs
200 000 – 35 000 contingent liability effect = 165,000 x 30%
49 500
Dr ARS
Zero + BV to FV 90 000 (330 000 BV – 420 000 FV) + 178 000 IA
= 268 000 x 30%
Dr Goodwill (80 900/70 x 30)
80 400
$
34 671
Cr NCI
278 571
(c) 100% Acquisition analysis
FV of consideration:
$650 000 Parent paid/70 x 100 =
928 571
FV of INA
SC 380 000 + REs 200 000 = BV of net assets 580 000 - contingent liability 35 000
+ BV to FV adjustment 90 000 + IA 178 000 = FV of INA $813 000
813 000
Total/100% of GW = Parent portion 80 900 + NCI portion 34 671 = $115 571
115 571
2
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
Question 1 continued:
Part B (a) Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2018
Parent
Sub
Notional Journal Entries
Group
Ltd
Ltd
Dr
Cr
Income statement/dividend items:
$
$
$
$
$
Income
1 290 000
823 685
(v) 74 000
2 025 485
(including interest income and dividend
(vi) 6 800
income)
(vi) 5 300
(vii) 2 100
Less expenses
890 238
619 046
(iii) 3 000
(vi) 2 200
1 496 824
(including COGS and interest expense)
(vi) 4 000
(vi) 1 860
(vi) 3 540
(vi)1 760
(vii) 2 100
Profit before tax
399 762
204 639
528 661
Less income tax expense
145 780
115 059
260 839
Profit after tax
253 982
89 580
267 822
Retained earnings – opening bal
145 324
196 000
Less: dividends declared and paid
110 000
74 000
289 306
211 580
-
36 000
Share capital
500 000
370 000
Total equity
$789 306
$617 580
839 886
Various liabilities
456 624
280 400
737 024
-
70 000
456 624
350 400
737 024
$1 245 930
$967 980
$1 576 910
Inventory
82 000
53 600
(vi) 2 800
Various other assets
563 930
914 380
(vii) 70 000
1 408 310
Investment in Subsidiary Ltd
600 000
-
600 000
-
-
-
$1 245 930
$967 980
160 000
(iii) 6 200
(vi) 2 200
(vi) 1 860
171 064
(iii)
(v) 74 000
110 000
Balance Sheet items:
Retained earnings – closing bal
Asset revaluation surplus
Loan payable to Parent Ltd
Total liabilities
Total equity and liabilities
Goodwill
Total assets
328 886
(iii)
(iii)
25 000
11 000
370 000
500 000
(vii) 70 000
-
(iii)
(iii)
45 000
771 460
132 800
(iii) 9 200
771 460
35 800
$1 576 910
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ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
Workings for Question 1 Part B (a) Notional Journal Entries
(i)
N/A
(ii) N/A
(iii)
Dr Share capital 370 000 x 100%
Dr REs
160 000 x 100%
Dr ARS
25 000 x 100%
Dr Goodwill
Cr Investment in Sub
Dr Impairment expense
Dr REs
(2 000 + 4 200)
Cr Goodwill
(iv)
No NCI
(v)
Dr Dividend income - Parent
Cr Dividend declared - Sub
(vi)
LY
TY
(vi)
LY
TY
(vii)
Upward sales:
Dr REs – Sub (Sales 8 000 – COGS = Profit 2 200)
Cr COGS – Parent (always assume sold in current year)
Dr Sales - Sub
Cr COGS – Sub (Sales 6 800 – profit 2 800 = COGS)
Cr Inventory - Parent
Downward sales:
Dr REs – Parent (Sales 4 000 – COGS = Profit 1 860)
Cr COGS – Sub (always assume sold in current year)
370 000
160 000
25 000
45 000
600 000
3 000
6 200
9 200
74 000
74 000
2 200
2 200
6 800
4 000
2 800
1 860
1 860
Dr Sales - Parent
Cr COGS-Parent (Sales 5300 – profit 1760 = COGS)
Cr COGS - Sub
5 300
Dr Loan payable to Parent Ltd - Sub
Cr Loan receivable from Sub - Parent
70 000
3 540
1 760
70 000
Use the ‘Various other assets’ line
Dr Interest income - Parent
Ct Interest expense - Sub
($70 000 x 3%)
2 100
2 100
4
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
Question 1 Part B continued:
Part B (b) Notional journal entry, at 31 March 2018, for the NCI measured at FV
Your workings must be shown on each line of the notional journal entry below:
Dr Share Capital
370 000 x 20%
$
74 000
Dr ARS
36 000 x 20%
$
7 200
Dr PAT
[89,580 – TY 2 800 + LY 2 200 – TY 3 000 impair = 85 980] x 20%
17 196
Dr RE
[196 000 – LY 2 200 – LYs impair 6 200 = 187 600] x 20%
37 520
Dr Goodwill
$45 000* x 20%
9 000
Cr Dividends declared
74 000 x 20%
14 800
Cr NCI (this is the balance of journal entry)
130 116
*Calculated in Part B (a) 100% of the GW in Sub is $45 000
Part B (c) Reconciliation of the two measurement methods for the NCI
$
NCI measured at FV, as per your answer in (b)
130 116
Subtract the 20% goodwill portion
(9 000)
Add back the impairment 3 000 + 6 200 = 9 200 x 20% =
NCI measured at the proportionate share in the recognised amounts of the Sub’s INA
1 840
122 956
5
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
QUESTION 2
Part A Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2016
Parent
Sub
Notional Journal Entries
Group
Ltd
Ltd
Dr
Cr
Income statement/dividend items:
$
$
$
$
$
Income (all types of income)
522,500
275,000
(vi)7,000
773,400
(vii)2,100
(v)15,000
Less expenses
410,000
197,000
(iii)4,000
(vi)5,000
600,100
(vi)3,800
(vii)2,100
Profit before tax
112,500
78,000
173,300
Less income tax expense
50,000
18,000
68,000
Profit after tax
62,500
60,000
105,300
Retained earnings – opening balance
50,000
40,000
Less: dividends declared
50,000
15,000
Retained earnings – closing balance
62,500
85,000
Share capital
400,000
100,000
Total equity
462,500
185,000
484,300
127,900
70,000
197,900
Consulting fee payable to Sub Ltd
2,100
-
Bank loan
92,500
30,000
122,500
Total liabilities
222,500
100,000
320,400
Total equity and liabilities
$685,000
$285,000
$804,700
Receivables
40,000
20,000
(vii)2,100
57,900
Inventory
120,000
55,000
(vi)3,200
171,800
Other assets
325,000
210,000
Investment in Sub Ltd
200,000
-
(iii)30,000
(iii)26,000
(vi)5,000
29,000
(v)15,000
50,000
Balance Sheet items:
Equity
84,300
(iii)100,000
400,000
Liabilities
Various liabilities
(vii)2,100
-
Assets
Goodwill
Total assets
$685,000
$285,000
535,000
(iii)200,000
-
(iii)70,000
(iii)30,000
40,000
261 200
261 200
$804,700
6
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
Question 2 continued:
Part B Notional journal entry for the NCI measured at FV
Parent 80% so NCI = 20%
31/03/16 Include all your workings on each line of your notional journal entry:
Dr Share Capital
$
20,000
$
100,000 x 20%
Dr RE- open
1,800
(40,000 – LY 5,000 – LY impairment 26,000) x 20%
Dr PAT
12,200
(60,000 – TY 0 + LY 5,000 – TY impairment 4,000) x 20%
Dr Goodwill
14,000
(70,000 x 20%)
Cr Dividends declared
3,000
15,000 x 20%
Cr NCI
45,000
Part C
Name of Equity account:
NCI
Name of Asset account:
Investment in Subsidiary
7
ACCTG 211
ASSIGNMENT 4 ANSWER BOOKLET
Semester 2 2018
QUESTION 3
Air NZ
1. How many significant subsidiaries does the
Parent entity control?
Auckland Airport
Six
Five
All are 100% owned.
Corporate information
policy note on page 26.
Note 13 page 18
2. Why is there no NCI account in the group
financial statements?
The Subs are 100% owned.
Page 18
3. The ‘Investments in other entities’ asset in
the SFP is predominantly made up of what
type of investment?
Investment in Associates are
$92 M of the $95 M total.
Note 13
4. The ‘Investments in Associates’ asset in the
SFP is predominantly made up of what type
of investment?
The Subs are wholly
owned. Page 26
Investment in Associates
$171.6 M *
Note 8 title is ‘Associates
and Joint Ventures’.
*How much of this is the
JV?
5. Within the Statement of Accounting
Policies there is one for the ‘Basis of
consolidation’. Within this policy find the
answers for the following:
(a) State the page number where you found
this policy
(b)The consolidated financial statements are
accounted for using which method?
(a) Page 8
(a) Page 27
(b) Acquisition method
(b) .Does not say
(c) They are eliminated.
(c) Are eliminated in
full
(c) What is done with the material
intercompany transactions?
8