Jetty Ltd purchased 100% of the shares of Mast Ltd on 1 July 2011. Financial information for Jetty Ltd and Mast Ltd for the year ended 30 June 2013 (two years after acquisition) is shown below:
Jetty Ltd / Mast Ltd
Sales revenue / $78,000 / $40,000
Proceeds from sale of office furniture / - / 3,000
Dividend revenue / 4,400 / 1,600
Total income / 82,400 / 44,600
Cost of sales / 60,000 / 30,000
Other expenses / 10,800 / 7,500
Total expenses / 70,800 / 37,500
Profit before income tax / 11,600 / 7,100
Income tax expense / (3,000) / (2,200)
Profit for the year / 8,600 / 4,900
Retained earnings (01/07/2012) / 14,500 / 2,800
23,100 / 7,700
Interim dividend paid / 4,000 / 2,000
Final dividend declared / 8,000 / 2,400
12,000 / 4,400
Retained earnings (30/06/2013) / 11,100 / 3,300
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Additional information:
(a) / On acquisition date, Jetty Ltd purchased 100% of the shares of Mast Ltd for $50,000. The equity of the two entities at this date was as follows:
Jetty Ltd / Mast Ltd
Asset revaluation surplus / $25,000 / $4,000
Retained earnings / 14,500 / 2,800
Share capital / 50,000 / 40,000
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At 1 July 2011, all the identifiable assets and liabilities of Mast Ltd were recorded at fair value except for the following:
Carrying amount / Fair value
Plant and equipment (cost $80,000) / $60,000 / $61,000
Inventory / 3,000 / 3,500
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All of this inventory was sold by December 2011. The plant and equipment had a remaining useful life of 5 years. Any valuation adjustments are made on consolidation.
(b) / Jetty Ltd records dividends receivable as revenue when dividends are declared.
(c) / The opening inventory of Mast Ltd included goods which cost Mast Ltd $2,000. Mast Ltd purchased this inventory from Jetty Ltd at cost plus 33¹/³%.
(d) / Intragroup sales totalled $10,000 for the year. Sales from Jetty Ltd to Mast Ltd, at cost plus 10%, amounted to $5,600. The closing inventory of Jetty Ltd included goods which cost Jetty Ltd $4,400. Jetty Ltd purchased this inventory from Mast Ltd at cost plus 10%.
(e) / On 31 December 2012, Mast Ltd sold Jetty Ltd office furniture for $3,000. This furniture originally cost Mast Ltd $3000 and was written down to $2,500 when sold. Jetty Ltd depreciates furniture at the rate of 10% p.a. on cost.
(f) / The asset revaluation surplus relates to the use of the revaluation model for land. The following movements occurred in this account:
Jetty Ltd / Mast Ltd
1 July 2011 to 30 June 2012 / $3,000 / $(500)
1 July 2012 to 30 June 2013 / $2,000 / $500
(g) / The tax rate is 30%.
Required:
A.Determine the gain on bargain purchase or goodwill as at acquisition date.
B.Prepare the consolidation journal entries for the year ended 30 June 2013.
C.Prepare a consolidation worksheet for the year ended 30 June 2013.
D.Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2013.