Posted: November 7th, 2022

Consolidation Assignment | Homework For You

Topic 2: Consolidation: Intra-group transactions On 1 July 2016, Pandora Ltd acquired all the issued shares of Sebastian Ltd. Pandora Ltd paid $30,000 in cash and 20,000 shares in Pandora Ltd valued at $3 per share. At this date, the equity of Sebastian Ltd consisted of $66,000 share capital and $6,000 retained earnings. At 1 July 2016, all the identifiable assets and liabilities of Sebastian Ltd were recorded at amounts equal to their fair values except for: The plant was considered to have a further 5-year life. The patents were sold for $120,000 to an external entity on 18 August 2016. The inventory was all sold by 30 June 2017. Additional information:

(a) Pandora Ltd sells certain raw materials to Sebastian Ltd to be used in its manufacturing process. At 1 July 2017, Sebastian Ltd held inventory sold to it by Pandora Ltd in the previous year at a profit of $600. During the 2017/2018 year, Pandora Ltd sold inventory to Sebastian Ltd for $21,000. None of this was on hand at 30 June 2018.

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(b) Sebastian Ltd also sells items of inventory to Pandora Ltd. During the 2017/2018 year, Sebastian Ltd sold goods to Pandora Ltd for $4,500. At 30 June 2018, inventory which had been sold to Pandora Ltd at a profit of $300 was still on hand in Pandora Ltd’s inventory.

(c) On 1 July 2017, Sebastian Ltd sold an item of plant to Pandora Ltd for $15,000. This plant had a carrying amount in the records of Sebastian Ltd of $14,000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.

(d) On 1 January 2017, Pandora Ltd sold an item of inventory to Sebastian Ltd for $18,000. The inventory had cost Pandora Ltd $16,000. This item was classified by Sebastian Ltd as plant. Plant of this type is depreciated by Sebastian Ltd at 20% p.a.

(e) On 1 March 2018, Sebastian Ltd sold an item of plant to Pandora Ltd. Whereas Sebastian Ltd classified this as plant, Pandora Ltd classified it as inventory. The sales price was $9,000 which included a profit to Sebastian Ltd of $1,500. Pandora Ltd sold this to another entity on 31 March 2018 for $9,900.

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(f) The tax rate is 30%. At 30 June 2018, the following financial information was provided by the two companies:

Pandora Ltd Sebastian Ltd Dr ($) Cr ($) Dr ($) Cr ($) Sales revenue 64,500 78,000 Cost of sales 30,900 46,350 Trading expenses 4,800 9,000 Office expenses 7,950 4,050 Depreciation expenses 1,800 3,900 Proceeds on sale of plant 9,000 15,000 Carrying amount of plant sold 7,500 14,000 Income tax expense 11,100 7,300 Share capital 96,000 66,000 Retained earnings (1/7/17) 48,000 31,500 Current liabilities 21,100 10,500 Deferred tax liability 11,000 15,000 Plant 57,000 107,250 Accumulated depreciation – plant 18,300 33,450 Intangibles 12,000 11,100 Deferred tax assets 8,100 9,450 Shares in Sebastian Ltd 90,000 0 Inventories 28,500 24,600 Receivables 8,250 12,450 267,900 267,900 249,450 249,450 Required: Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of Pandora Ltd for the year ended 30 June 2018. Finance homework help

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