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Consolidation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Consolidation

  • This topic has 1 reply, 2 voices, and was last updated 6 months ago by John Moffat.
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  • July 18, 2022 at 7:18 am #660973
    fifyfofum
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    The following financial statements of Tina Ltd and its subsidiary Jane Ltd have been extracted from their financial records at 30 June 2020.
    Tina Ltd Jane Ltd
    Reconciliation of operating profit and closing retained earnings
    Sales revenue 671400 540000
    Cost of goods sold (464000) (238000)
    Gross profit 207400 302000
    Dividends received from Jane Ltd 93000 –
    Management fee revenue 26500
    Gain on sale of plant 40000 35000
    Expenses
    Administrative expenses (30800) (38700)
    Depreciation (29500) (56800)
    Management fee expense – (26500)
    Other expenses (101100) (72000)
    Profit before tax 205500 143000
    Tax expense (61500) (42200)
    Profit for the year 144000 100800
    Retained earnings 30 June 2019 319400 239200
    463400 340000
    Dividends paid (137400) (93000)
    Retained earnings 30 June 2020 326000 247000
    Tina Ltd Jane Ltd
    Statement of financial position
    Shareholders’ equity
    Retained earnings 314683 247000
    Share capital 350000 200000
    Current liabilities
    Accounts payable 54700 46300
    Tax payable 41300 25000
    Non-current liabilities
    Loans 173500 116000
    945500 634300
    Current assets
    Accounts receivable 49400 62300
    Inventory 92000 29000
    Non-current assets
    Land and Buildings 224000 326000
    Plant – at cost 299850 355800
    Accumulated depreciation (85705) (138800)
    Investment in Jane Ltd 356000 –
    945500 634300

    Other information
    a) Tina Ltd acquired its 100 per cent interest in Jane Ltd on 1 July 2015, that is, five years earlier. At that date the capital and reserves of Jane Ltd were:
    Share capital $200,000
    Retained earnings 180,000
    $380,000
    At the date of acquisition all assets were considered to be fairly valued.
    b) During the year Tina Ltd made total sales to Jane Ltd of $60,000.
    c) The closing inventory in Tina Ltd includes inventory acquired from Jane Ltd at a cost of $33,000. This cost Jane Ltd $28,000 to produce.
    d) Jane Ltd sold $50,000 in inventory to Tina Ltd.
    e) The closing inventory of Jane Ltd includes inventory acquired from Tina Ltd at a cost of $12,000. This cost Tina Ltd $10,000 to produce.
    f) The opening inventory in Tina Ltd as at 1 July 2019 included inventory acquired from Jane Ltd for $40,000 that cost Jane Ltd $30,000 to produce.
    g) On 1 July 2019 Jane Ltd sold an item of plant to Tina Ltd for $116,000 when its carrying value in Jane Ltd’s accounts was $81,000 (cost $135,000, accumulated depreciation $54,000). This plant is assessed as having a remaining useful life of six years. The group has a policy of measuring its property, plant and equipment using the cost model. The group uses the straight-line method of depreciation.
    h) Jane Ltd paid $26,500 in management fees to Tina Ltd
    i) The tax rate is 30 per cent.

    July 18, 2022 at 9:02 am #661016
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    We do not provide answers to test questions.

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    Everything needed to be able to answer this question is explained in my free lectures.

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