Question 1 BARGAIN PURCHASE, CONSOLIDATION WORKSHEET

EQUULEUS LTD – FORNAX LTD

At DOA (1 Jan 2013):

Net fair value of identifiable assets

and liabilities of Fornax Ltd = ($10 000 + $2000 + $1500) (equity)
+ $2000*(1-30%) (DOA land)
+ $ 1000*(1-30%) (DOA plant)
+ $ 1000*(1-30%) (DOA inventory)
= $16,300
Consideration transferred = $15 000
Gain on bargain purchase = $1,300

DOA (1 Jan 2013)

BCVR Entries:

(1) Dr: Land 2,000

Cr: DTL 600
Cr: BCVR 1,400

(2) Dr: Acc. Dep. 500

Dr: Plant 500
Cr: DTL 300
Cr: BCVR 700

(3) Dr: Inventory 1,000

Cr: DTL 300
Cr: BCVR 700

Pre-acquisition entry:

(4) Dr: Share Capital 10,000

Dr: General Reserve 2,000
Dr: RE (Opening) 1,500
Dr: BCVR 2,800
Cr: Shares in Fornax Ltd 15,000
Cr: Gain on Bargain Purchase 1,300
YE1 (31 Dec 2013):
BCVR Entries:

(1) Dr: Land 2,000

Cr: DTL 600
Cr: BCVR 1,400

(2a) Dr: Acc. Dep. 500

Dr: Plant 500
Cr: DTL 300
Cr: BCVR 700

(2b) Dr: Dep. Exp. 200

Cr: Acc. Dep. 200

(2c) Dr: DTL 60

Cr: ITE 60

(3) Dr: COGS 1,000

Cr: ITE 300
Cr: BCVR 700

Pre-acquisition entry:

(4) Dr: Share Capital 10,000

Dr: General Reserve 2,000
Dr: RE (Opening) 1,500
Dr: BCVR 2,800
Cr: Shares in Fornax Ltd 15,000
Cr: Gain on Bargain Purchase 1,300
YE2 (31 Dec 2014):
BCVR Entries:

(1) Dr: Gain 2,000

Cr: ITE 600
Cr: BCVR 1,400

(2a) Dr: Acc. Dep. 500

Dr: Plant 500
Cr: DTL 300
Cr: BCVR 700

(2b) Dr: Dep. Exp. 200

Dr: RE (Opening) 200
Cr: Acc. Dep. 400

(2c) Dr: DTL 120

Cr: ITE 60
Cr: RE (Opening) 60

(3) Dr: RE (Opening) 700

Cr: BCVR 700

Pre-acquisition entry:

(4) Dr: Share Capital 10,000

Dr: General Reserve 2,000
Dr: RE (Opening) 1,500
Dr: BCVR 2,800
Cr: Shares in Fornax Ltd 15,000
 Cr: RE (Opening) 1,300 (bargain purchase in
2013 transfer to
RE)

Worksheet:
Consolidation worksheet at 31 Dec 2013
Equuleu
Financial Statements s Fornax Dr Cr Consolidation
Profit before tax 3,200 1,800 1 2,000 2,800
2 200
Income tax expense 1,300 240 60 2 880
600 1
Profit for the period 1,900 1,560 1,920
Retained earnings(1/1/2014) 1,500 2,100 2 200 60 2 2,560
3 700 1,300 4
4 1,500
Dividend paid 500 0 500
Retained earnings (31/12/2014) 2,900 3,660 3,980
Share Capital 25,000 10,000 4 10,000 25,000
General Reserve 8,000 3,000 4 2,000 9,000
FA fair value change reserve(1/1/2014) 1,500 300 1,800
change during the year (OCI) -500 200 -300
FA fair value change reserve(31/12/2014) 1,000 500 1,500
BCVR - - 4 2,800 1,400 1 0
700 2
700 3
Total equity 36,900 17,160 39,480
Liabilities (include DTL) 5,000 1,300 2 120 300 2 6,480

Total equity and liability 41,900   18,460 45,960

Land 8,600 5,100 13,700

Plant 17,000 8,000 2 500 25,500
Accumulated depreciation 5,000 1,000 2 500 400 2 5,900
Financial assets 3,000 2,000 5,000
Inventory 3,000 4000 7,000
Cash 300 360 660
 15,00
Shares in Fornax Ltd 15,000 - 0 4 0
Total assets 41,900 18,460 20,520 20520 45,960
 Equuleus LTD
Consolidated Statement of profit or Loss and Other Comprehensive Income
for financial year ended 31 Dec 2014

Profit before income tax $2,800

Income tax expense 880
Profit for the period $1,920
Other comprehensive income:
FA fair value decrease (300)
Comprehensive income for the period $ 1,620

Equuleus LTD
Consolidated Statement of Changes in Equity for financial year ended 31 Dec 2014
Share General FA Fair Value
Capital Reserve Change Reserve RE Total
Balance on 1 Jan 2014 25,000 9,000 1,800 2,560 38,360
Total comprehensive income - - (300) 1,920 1,620
Dividend - - - (500) (500)
Balance on 31 Dec 2014 25,000 9,000 1,500 3,980 39,480

Consolidated Statement of Financial Position

as at 31 Dec 2014

Current Assets
Inventory $7 000
Financial assets 5 000
Cash 660
Total Current Assets 12 660
Non-current Assets
Property, plant and equipment:
Land 13 700
Plant 25 500
Accumulated depreciation – Plant (5 900)
Total Non-current Assets 33 300
_______
Total Assets $45 960

Equity
Share capital $25 000
 General reserve 9 000
FA fair value change reserve 1 500
Retained earnings 3 980
Total Equity 39 480
Liabilities 6 480
Total Equity and Liabilities $45 960
Question 2 CONSOLIDATION WORKSHEET, UNRECOGNISED INTANGIBLES AND
LIABILITIES

AURIGA LTD – PERSEUS LTD

At 1 Jan 2013:
Net fair value of identifiable assets
and liabilities of Perseus Ltd = $100 000 + $35 000
+ $4000*(1-30%) (DOA inventory)
+ $10 000*(1-30%) (DOA land)
+ $3000*(1-30%) (DOA plant)
- $5000*(1-30%) (DOA guarantee liability)
+ $6000*(1-30%) (DOA patent)
= $147,600
Consideration transferred = $160 000
Goodwill = $ 12,400

At DOA (1 Jan 2013):

BCVR Entries:

(1) Dr: Inventory 4,000

Cr: DTL 1,200
Cr: BCVR 2,800

(2) Dr: Land 10,000

Cr: DTL 3,000
Cr: BCVR 7,000

(3) Dr: Acc. Dep. 25,000

Cr: Plant 22,000
Cr: DTL 900
Cr: BCVR 2,100

(4) Dr: DTA 1,500

Dr: BCVR 3,500
Cr: Loan Guarantee Liability 5,000

(5) Dr: Patent 6,000

Cr: DTL 1,800
Cr: BCVR 4,200

(6) Dr: Goodwill 12,400

Cr: BCVR 12,400
Pre-acquisition entry:

(7) Dr: Share Capital 100,000

Dr: RE (Opening) 35,000
Dr: BCVR 25,000
Cr: Shares in Perseus Ltd 160,000

At YE1 (31 Dec 2013):

Goodwill Entry:

(1) Dr: COGS 4,000

Cr: ITE 1,200
Cr: BCVR 2,800

(2) Dr: Gain 10,000

Cr: ITE 3,000
Cr: BCVR 7,000

(3a) Dr: Acc. Dep. 25,000

Cr: Plant 22,000
Cr: DTL 900
Cr: BCVR 2,100

(3b) Dr: Dep. Exp. 600

Cr: Acc. Dep. 600

(3c) Dr: DTL 180

Cr: ITE 180

(4) Dr: DTA 1,500

Dr: BCVR 3,500
Cr: Loan Guarantee Liability 5,000

(5a) Dr: Patent 6,000

Cr: DTL 1,800
Cr: BCVR 4,200

(5b) Dr: Amortization 1,000

Exp.
 Cr: Acc. amortization 1,000

(5c) Dr: DTL 300

Cr: ITE 300

(6) Dr: Goodwill 12,400

Cr: BCVR 12,400

Pre-acquisition entry:

(7) Dr: Share Capital 100,000

Dr: RE (Opening) 35,000
Dr: BCVR 25,000
Cr: Shares in Perseus Ltd 160,000

At YE2 (31 Dec 2014):

Goodwill Entry:

(1) Dr: RE (Opening) 2,800

Cr: BCVR 2,800

(2) Dr: RE (Opening) 7,000

Cr: BCVR 7,000

(3a) Dr: Acc. Dep. 25,000

Cr: Plant 22,000
Cr: DTL 900
Cr: BCVR 2,100

(3b) Dr: Dep. Exp. 600

Dr: RE (Opening) 600
Cr: Acc. Dep. 1,200

(3c) Dr: DTL 360

Cr: ITE 180
Cr: RE (Opening) 180

(4) Dr: DTA 1,500

Dr: BCVR 3,500
 Cr: Loan Guarantee Liability 5,000

(5a) Dr: Patent 6,000

Cr: DTL 1,800
Cr: BCVR 4,200

(5b) Dr: Amortization Exp. 1,000

Dr: RE (Opening) 1,000
Cr: Acc. amortization 2,000

(5c) Dr: DTL 600

Cr: ITE 300
Cr: RE (Opening) 300

(6) Dr: Goodwill 12,400

Cr: BCVR 12,400

Pre-acquisition entry:

(7) Dr: Share Capital 100,000

Dr: RE (Opening) 35,000
Dr: BCVR 25,000
Cr: Shares in Perseus Ltd 160,000

At YE3 (31 Dec 2015):

Goodwill Entry
(1) Dr: RE (Opening) 2,800
Cr: BCVR 2,800

(2) Dr: RE (Opening) 7,000

Cr: BCVR 7,000

(3) Dr: Dep. Exp. 300

Dr: RE (Opening) 1,200
Dr: Gain 1,500
Cr: BCVR 2,100
Cr: ITE 540
Cr: RE 360

(4) Dr: ITE 1,500

Dr: BCVR 3,500
 Cr: Gain on Guarantee 5,000

(5a) Dr: Patent 6,000

Cr: DTL 1,800
Cr: BCVR 4,200

(5b) Dr: Amortization Exp. 1,000

Dr: RE (Opening) 2,000
Cr: Acc. amortization 3,000

(5c) Dr: DTL 900

Cr: ITE 300
Cr: RE (Opening) 600

(6) Dr: Goodwill 12,400

Cr: BCVR 12,400

Pre-acquisition entry:

(7) Dr: Share Capital 100,000

Dr: RE (Opening) 35,000
Dr: BCVR 25,000
Cr: Shares in Perseus Ltd 160,000

Worksheet:
Consolidation worksheet at 31 Dec 2015
Financial Statements Auriga Perseus Dr Cr Consol.
Profit before tax 50,000 15,000 3 300 5,000 4 67,200
3 1,500
5 1,000
Income tax expense -20,000 -6,000 4 1,500 540 3 -26,660
300 5
Profit for the period 30,000 9,000 40,540
Other recognized income and expense:
Gains on plant revaluation 6,000 0 6,000
Gains on financial assets -4,000 -10,000 -14,000
Comprehensive income for the year 32,000 -1,000 32,540
Profit 30,000 9,000 40,540
Retained earnings(1/1/15) 37,000 45,000 1 2,800 360 3 34,960
1 7,000 600 5
3 1,200
5 2,000
7 35,000
Dividend paid -20,000 - -20,000
Retained earnings (31/12/15) 47,000 54,000 55,500
Share Capital 150,000 100,000 7 100,000 150,000
General Reserve 12,000 - 12,000
BCVR - - 4 3,500 2,800 1 0
7 25,000 7,000 2
2,100 3
4,200 5
12,400 6
Asset revaluation reserve (1/1/15) 14,000 - 14,000
Gains on plant revaluation 6,000 - 6,000
Asset revaluation reserve (31/12/15) 20,000 - 20,000
FA fair value change reserve (1/1/15) 14,000 14,000 28,000
Losses on FA fair value change -4,000 -10,000 -14,000
FA fair value change reserve (31/12/15) 10,000 4,000 14,000
Total equity 239,000 158,000 251,500
Payables 19,000 8,000 27,000
Loan 25,000 - 25,000
DTL - - 5 900 1,800 5 900
Total liabilities 44,000 8,000 52,900
Total equity and liabilities 283,000 166,000 304,400

Cash 5,000 14,000 19,000

Financial assets 10,000 5,000 15,000
Inventory 30,000 21,000 51,000
Plant and equipment 140,000 163,000 303,000
Accumulated depreciation -62,000 -37,000 -99,000
Shares in Perseus Ltd 160,000 - 160,000 7 0
Goodwill - - 6 12,400 12,400
Patent - - 5 6,000 6,000
Accumulated amortization - - 3,000 5 -3,000
Total assets 283,000 166,000 200100 200100 304,400
 AURIGA LTD
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for year ended 31 Dec 2015

Profit before income tax $67 200

Income tax expense 26 660
Profit for the period $40 540
Other comprehensive income:
Losses on financial assets fair value change (14 000)
Gains on revaluation of assets 6 000
Total Comprehensive income for the period $32 540

AURIGA LTD
Consolidated Statement of Changes in Equity for year ended 31 Dec 2015

Assets FA fair
Revaluation value
Share General reserve change
Capital Reserve reserve RE Total
Balance on 1/1/15 150 000 12 000 14 000 28 000 34 960 238 960
Total comprehensive income - - 6 000 (14 000) 40 540 32 540
Dividend - - - - (20 000) (20 000)
Balance on 31/12/15 150 000 12 000 20 000 14 000 55 500 251 500
 Consolidated Statement of Financial Position
as at 31 Dec 2015

Current Assets
Cash $19 000
Financial assets 15 000
Inventory 51 000
Total Current Assets 85 000

Non-current Assets
Property, plant, and equipment $303 000
Accumulated depreciation (99 000) 204 000
Goodwill 12 400
Intangibles: Patent 6 000
Accumulated amortisation (3 000) __3 000
Total Non-current Assets 219 400

Total Assets $304 400

Equity
Share capital $150 000
General reserve 12 000
Asset revaluation reserve 20 000
FA fair value change reserve 14 000
Retained earnings 55 500
Total Equity 251 500
Current Liabilities
Payables 27 000
Non-current Liabilities
DTL 900
Loan 25 000
Total Liabilities 52 900
_______
Total Equity and Liabilities $304 400