Acct209 Lotus Limited Statement Assignment Answers

Lotus Limited acquired the shares in Troy Limited at 1 January 2018, buying the 10000 shares in Troy Limited for $40000. At that date, Troy Limited recorded share capital of $20000. The shares were bought on a cum div Troy Limited had declared prior to the acquisition a dividend of $6000 that was paid in March 2018.
At 1 January 2018, all identifiable assets and liabilities of Troy Limited were recorded at fair value, except for inventories, for which the carrying amount was $800 less than fair value. A number of inventories have been difficult to sell, and 10% of it is still in hand at 31 December 2018.
Inventories on hand in Troy Limited at 31 December 2018 also include some items acquired from Lotus Limited during the period ended 31 December 2018. These were sold by Lotus Limited for $10000, at a profit before tax of $2000.
Half of the goodwill was written off as the result of an impairment test on 31 December 2018.
During March 2018, Lotus Limited provided management services to Troy Limited at a fee of $1000 paid by 31 December 2018.
On 1 July 2018, Troy Limited sold machinery to Lotus Limited at a gain of $4000. This machinery had a carrying amount to Troy Limited of $40000. Lotus considered that this machinery had a 5 year life.
By 31 December 2108, the financial assets acquired by Lotus Limited and Troy Limited from external entities increased $2000 and $1300 respectively, with gains and losses being recognised in other comprehensive income.
The TAX RATE is 30%

REQUIRED

Prepare the acquisition analysis as at 1 January 2018.
Prepare the business combination valuation entries and pre-acquisition entries as at 1 January 2018.
Prepare the business combination valuation entries and pre-acquisition at 31 December 2018.
Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2018.
Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 31 December 2018.
Prepare the consolidated statement of profit or loss and other comprehensive income for Lotus Limited and its subsidiary, Troy limited, at 31 December 2018.

Answer:

Sales Revenue

Sl No	Particulars	Amount	Amount
1	Sales Revenue of Lotus Limited	50000
2	Sales Revenue of Troy Limited	47200
3	Less : Inter company sales	-10000
4	Sales to be reported		87200


Dividend Revenue
Sl No	Particulars	Amount	Amount
1	Dividend Revenue of Lotus Limited	2000
2	Less: Intercompany Dividend	-2000
3	Dividend Revenue to be reported		0

Gain on Sales of Property and Equipment

Sl No	Particulars	Amount	Amount
1	Gain of Lotus Limited	4000
2	Gain of Troy Limited	2000
3	Less Gain on intercompany sale	-4000
4	Gain on Sales of Property and Equipment to be reported		2000

Other Income

Sl No	Particulars	Amount	Amount
1	Other Income of Lotus Limited	2000
2	Other Income of Troy Limited	4000
3	Less: Intercompany Service	-1000
4	Other Income to be reported		5000

Cost of Sales

Sl No	Particulars	Amount	Amount
1	Lotus Limited	42000
2	Troy Limited	36000
3	Less: Intercompany Purchase	-10000
4	Cost of Sales to be reported		68000

Other Expenses

Sl No	Particulars	Amount	Amount
1	Lotus Limited	6000
2	Troy Limited	2000
3	Cost of other expense to be reported		8000

Impairment
Sl No	Particulars	Amount	Amount
1	Goodwill Impairment	3770
2	Reported figure		3770

Inventory Loss
Sl No	Particulars	Amount	Amount
1	Reduction in inventory value	800
2	Reported figure		800

Consolidated Profit and Loss Account
For 31st December, 2018
Sl No	Particulars	Notes	Amount	Amount
Continuing Operations
1	Revenue	1		87200
2	Cost of sales	2		68000
3	Gross Profit			19200
4	Distribution Cost
5	Administration Expense
6	Other Expense	3		-12570
7	Other Income	4		5000
8	Other Gain	5		2000
9	Profit before Income Tax			13630
10	Income Tax Expense			4089
11	Profit from Continuing Operations			9541
Assumption: Depreciation has not been charged initially on asset transferred intercompany

Statement of Comprehensive Income
For 31st December, 2018
Sl No	Particulars	Notes	Amount	Amount
Other comprehensive Income
1	Changes in fair value of available for sale asset	6		3300
2	Income Tax Expense			990
3	Other comprehensive income for the period net of taxes			2310


Notes
Note 1
Sales Revenue
Sl No	Particulars	Amount	Amount
1	Sales Revenue of Lotus Limited	50000
2	Sales Revenue of Troy Limited	47200
3	Less : Inter company sales	-10000
4	Sales to be reported		87200

Note 2

Cost of Sales
Sl No	Particulars	Amount	Amount
1	Lotus Limited	42000
2	Troy Limited	36000
3	Less: Intercompany Purchase	-10000
4	Cost of Sales to be reported		68000


Note 3


Other Expenses
Sl No	Particulars	Amount	Amount
1	Lotus Limited	6000
2	Troy Limited	2000
3	Cost of other expense to be reported		8000

Impairment
Sl No	Particulars	Amount	Amount
1	Goodwill Impairment	3770
2	Reported figure		3770

Inventory Loss
Sl No	Particulars	Amount	Amount
1	Reduction in inventory value	800
2	Reported figure		800

	Total		12570


Note 4

Other Income
Sl No	Particulars	Amount	Amount
1	Other Income of Lotus Limited	2000
2	Other Income of Troy Limited	4000
3	Less: Intercompany Service	-1000
4	Other Income to be reported		5000

Note 5


Gain on Sales of Property and Equipment
Sl No	Particulars	Amount	Amount
1	Gain of Lotus Limited	4000
2	Gain of Troy Limited	2000
3	Less Gain on intercompany sale	-4000
4	Gain on Sales of Property and Equipment to be reported		2000

Note 6
Changes in fair value of available for sale asset
Sl No	Particulars	Amount	Amount
1	Gain of Lotus Limited	2000
2	Gain of Troy Limited	1300
3	Reported Figure		3300

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