S1 2015 Marking Guide

Question 1 Lease NOT RELEVANT in Snot relevant 2018.

Question 2 (13 marks in total)

Journal entries in records of Western Ltd

1-Jul-17
Cash in JO Dr 450,000 (900 x 0.5)
Machinery in JO Dr 450,000 (900 x 0.5)
Cash Cr 900,000

Journal entries in records of John Ltd

1-Jul-17
Cash in JO Dr 450,000 (900 x 0.5)
Machinery in JO Dr 300,000 (600 x 0.5) 1
Machinery Cr 600,000
Gain on Sale of Machinery Cr 150,000 (900/2-600/2)

Journal entries in records of John Ltd

30-Jun-18
Raw Material in JO Dr 30,000 (60 x 0.5) 0.5
Work in Progress in JO Dr 240,000 (480 x 0.5) 0.5
Inventory in JO Dr 60,000 (120 x 0.5) 1
Inventory Dr 420,000 (840 x 0.5) 1
Accumulated Depreciation – Cr 45,000 (90x 0.5) 1
Machinery in JO
A/cs Payable in JO Cr 36,000 (72 x 0.5) 1
Accrued wages in JO Cr 45,000 (90x 0.5) 1
Loan in JO Cr 300,000 (600 x 0.5) 1
Cash in JO Cr 324,000 [450 –(252/2)] 1

Accumulated Depreciation – 15,000 1

Machinery in JO
Work in Progress in JO 5,000 1
Inventory in JO 1,250 1
Inventory 8,750 1

Proportional allocation: Share of $15,000

Working in Progress in JO $240,000 24/72 =1/3 $5,000
Inventory in JO 60,000 60/72=1/12 1,250
Inventory 420,000 42/72= 7/12 8,750
$720,000 15,000

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Question 3 Foreign Operations SOLUTION (13 marks in total)
Requirement 1.

GBP Rate A$
Sales 252,000 0.55 458,182 1
Expenses -230,000 0.55 -418,182 1
Profit 22,000 40,000
Retained earnings (01/01/13) 60,000 0.60 100,000 1
Retained earnings (31/12/13) 82,000 140,000
Share capital 240,000 0.60 400,000 1
Foreign currency translation 0 104,000
reserve 1
Total Equity $ $
322,000 644,000 1

Cash 58,500 0.50 117,000

Equipment 360,000 0.50 720,000 1
(Accum. depn - Equip.) -72,000 0.50 -144,000 1
Accounts Payable -24,500 0.50 -49,000 1
Net Assets $ $
322,000 644,000
Total 9

Requirement 2
Profit 22,000
Profit as translated 40,000 AUD c/f
Profit @ closing rate (22,000/0.5) 44,000 AUD 1
Translation gain (loss) 4,000 AUD 1

Net investment at 1 January 2013 300,000

Net investment @ opening rate
(GBP 300,000 / 0.6) 500,000 AUD 1
Net investment @ closing rate
(GBP 300,000 / 0.5) 600,000 AUD 1
Translation gain (loss) 100,000 AUD c/f

104,000
Total 4

Question 4 Company Consolidations (21 marks in total)

2
Requirement (1) (5 marks)

Acquisition analysis
Net FV of identifiable assets & liabilities:
Share capital 200,000
General reserve 30,000
Retained earnings 28,000
Inventory 4,200
Property Plant & Equipment 10,500
$ 272,700 1 mark (½ mark if not all included)

(a) Consideration transferred $ 240,000

less: Dividend Receivable - 3,750 ½ mark
$ 236,250 ½ mark

(b) NCI in Dalia Ltd

25% x 272,700 $ 68,175 1 mark

Aggregate of (a) and (b) $ 304,425 1 mark (c/fwd)

Goodwill (½ mark) $ 31,725 ½ mark (c/fwd)

Requirement 2 (a) (5 marks)

BCVR entries @ 30 June 2017

Cost of sales 6,000
ITE 1,800
Transfer from BCVR 4,200 1 mark for jnl entry

Accumulated Depn - PPE 90,000

Property Plant & Equipment 90,000 1 mark for jnl entry

Property Plant & Equipment 15,000

DTL 4,500
BCVR 10,500 1 mark for jnl entry

Depn Exp - PPE 5,000

Accumulated Depn - PPE 5,000 1 mark for jnl entry

DTL 1,500
ITE 1,500 1 mark for jnl entry

Requirement 2 (b) (7 marks)

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 Pre-acquisition entries @ 30/6/17 - Parent
Share capital 150,000
General reserve 22,500
Retained earnings 21,000
BCVR 11,025
Goodwill 31,725
Shares in Dalia Ltd 236,250 2 marks for jnl entry

Trfr from BCVR 3,150

BCVR 3,150 0.5 mark for jnl entry
(Sale of Inventory: 75% of $4,200)

NCI share of equity at 1/7/16

Share capital 50,000
General reserve 7,500
Retained earnings 7,000
BCVR 3,675
NCI 68,175 2 marks for jnl entry

NCI share of equity: 1/7/16 - 30/6/17ssss

NCI share of profit 9,325
NCI 9,325 2 marks for jnl entry
(25% x (45,000 - [6000-1800] - [5000-1500]))

Trfr from BCVR 1,050

BCVR 1,050 0.5 mark for jnl entry
(Sale of Inventory: 25% of $4,200)

Requirement 3 (a) (2 marks)

Sale of inventory from Camellias Ltd to Dalia Ltd (downstream)

Workings only
Year ended 30 June 2017
Sales Revenue 20,000
Cost of Sales 19,000 17,000 + [1/3 x 3,000]
Inventory 1,000 3,000 – [1/3 x 3,000]
DTA 300
ITE 300

Required
Year ended 30 June 2018
Retained Earnings 1,000

4
 Cost of Sales 1,000 1 mark
ITE 300
Retained Earnings 300 1 mark

Requirement 3 (b) (2 marks)

Sale of equipment from Dalia Ltd as inventory to Camellias (upstream)

Required
Year ended 30 June 2018

Proceeds from sale of equipment 34,000

Carrying amount of equipment
sold 30,000
1.5 marks jor jnl
Inventory 4,000 entry

DTA 1,200
0.5 mark for jnl
ITE 1,200 entry

5
Q 5 (10 marks in total)

SAGE LTD - PEONY LTD

After- tax Profit for the period ending 30 June 2015 80,000 1

Adjustments:
Realised profit on equipment sold 1/7/12(a)
(20% x $4000 x (1-30%)) 560 1

Unrealised profit on sale of furniture 1/1/15 (b)

original profit of $2000 x (1-30%) - 1,400 1
depreciation of 10% x 1/2 year x A-T profit 70 1 - 1,330

Unrealised profit in ending inventory (c )

(5,000 x (1-30%)) - 3,500 1

Realised profit on motor vehicle sold 1/7/11 (d)

(10% x $3000 x (1-30%)) 210 1
75,940

Investor's Share @ 25% 18,985 1

Journal entries in Sage Ltd:

Cash DR 2,500
Investment in Peony Ltd CR 2,500 1
(Dividend declared in previous year received from Associate)
[25% x $10,000]

Cash DR 1,875
Investment in Peony Ltd CR 1,875 1
(Interim dividend received from Associate)
[25% of $7,500]

Investment in Peony Ltd DR 18,985

Share of profit (loss) of associate CR 18,985 1

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