ACC20013 Company Accounting

Semester 2, 2016

Task 2
Financial Statements
&
Consolidations
(20 Marks)

Part 2A: (individual submission)

Marks:
DUE DATE:

10%
Monday 19 SEPTEMBER 2016 by 5:30pm
(See Unit Outline for Late Submission penalty)

SUMBIT:

Via Turnitin. One submission per STUDENT

Part 2B: (Group submission)

Marks:
DUE DATE:

10%
Monday 17 OCTOBER 2016 by 5:30pm
(See Unit Outline for Late Submission penalty)

SUMBIT:

1|P a g e

Hard Copy. One submission per GROUP

PART A
PART 2A (10 marks)

MATCH THE BUSINESSES

One submission per STUDENT

Introduction
In this part of the assignment you are to take the role of business analyst in reverse: identify
companies by type and prepare appropriate financial statements. Shown below are extracts of
the financial information of 5 companies and also 5 different business descriptions. You will be
required to work backwards to match up the financial information with the business
descriptions.

Business Descriptions for the FIVE Companies

Brief business descriptions for the five companies are shown in the following Table
Company

Descriptions

This company engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide.

This company operates general department stores in Australia.

This company provides information technology (IT) products and

services worldwide.

This company provides freight and cargo transportation services in

Australia and globally.

This company is in the hospitality industry and it manages, franchises,

owns, and develops branded hotels, resorts, and residential and
vacation ownership properties worldwide. Its portfolio currently
consists of 508 properties in 15 countries.

2|P a g e

Extract of Accounts for the Five Companies (information has been indexed)

Extract of Accounts

CO 1

CO 2

Co 3

CO 4

Co 5

Indexed

2X16

2X16

2X16

2X16

2X16

4.67%

1.81%

14.65%

6.14%

7.32%

23.71%

6.95%

14.24%

3.56%

5.40%

1.80%

4.00%

4.97%

4.69%

2.93%

1.68%

20.40%

1.63%

2.68%

0.69%

3.94%

1.61%

1.11%

3.74%

0.73%

0.02%

0.05%

4.20%

5.14%

1.11%

0.00%

0.65%

2.72%

4.10%

6.75%

17.53%

14.82%

0.47%

24.23%

0.00%

8.07%

1.05%

36.41%

21.85%

10.00%

20.44%
0.00%

17.09%
0.00%

30.43%
0.00%

29.85%
0.00%

29.69%
5.59%

0.00%

1.00%

2.01%

0.00%

0.00%

7.97%

5.74%

2.74%

18.10%

3.70%

2.16%

3.41%

1.86%

3.10%

1.85%

4.18%

9.67%

0.00%

0.00%

0.31%

0.00%

0.00%

0.64%

0.00%

0.00%

35.42%

15.18%

43.64%

35.96%

79.32%

9.28%

4.54%

3.34%

9.30%

5.49%

0.00%

2.59%

7.00%

1.99%

9.01%

-0.50%

0.53%

6.54%

-4.85%

1.05%

50.82%

40.00%

20.84%

14.14%

20.00%

4.00%

0.00%

0.00%

0.00%

7.36%

0.00%

2.91%

0.00%

0.00%

1.43%

3.31%

24.00%

0.00%

4.88%

0.27%

1.50%

3.00%

0.56%

0.00%

0.00%

0.00%

17.00%

0.00%

0.00%

0.00%

0.00%

2.00%

0.00%

11.40%

0.00%

8.07%

1.05%

36.41%

12.20%

10.00%

0.00%

2.65%

0.00%

0.00%

7.00%

0.00%

21.85%

10.00%

Accounts Payable
Accounts Receivable (Net)
Accrued Expenses
Cash and Cash equivalents
Current Assets - Other
Debt (short term)
Deferred Tax Liability
Intangibles
Inventory (Net)
Long Term Debt (Secured with Fixed Charge)
Non-Controlling Interest
Notes Payable
Other Current Liabilities & Provisions
Other LT Assets
Other LT Investments
Prepayments
Property, Plant and Equipment (Net)
Provisions (Long Term)
Reserves
Retained Profits
Share Capital - Ordinary Shares
Share Capital - Preference Shares
Shares in Other Companies
Short term Cash Investments
Tax Payable
Unearned (Deferred) Revenue
Unearned (Deferred) Revenue - Long Term
Supplementary Information
Inventory - Finished Goods
Inventory - WIP
Inventory - Raw Materials
Total

3|P a g e

8.07%

1.05%

36.41%

REQUIRED:
1.

From the Extracts of the Financial Information above, your task is to:
1.1. Match the numbered balance sheets extracts (1-5), to the letter
descriptions of the companies (A-E). That is, match the numbers to the
letters.
1.2. Provide reasons for how you chose the match. In particular, what specific
line items did you focus on and why?

2.

Prepare an appropriate statutory Statement of Financial Position for any ONE

of the companies on the list. Notes to the Statement are not required, but may
be included if deemed necessary.
(It is suggested that you replace the percentage amounts with dollar amounts)

3.

There is a general belief in the business world that some users of financial
statements think that these statements should provide information about all the
accounting policies of the entity because disclosure of all accounting policies
makes the financial statements more understandable.
Explain whether you agree or disagree with this comment.
(2 + 3 + 2+ 3 = 10 marks)
Word Count: 1,500 words (+/-10%)

PART A Submission Instructions

SSUBMIT via Turnitin the following:

o
o
o
o
o

Answers to Requirements 1, 2 and 3

Include Workings (as needed) to support your answer
Bibliography
One submission per STUDENT
Due Date: Monday 19 SEPTEMBER 2016 by 5:30pm

4|P a g e

PART B
The information in Part B is not related to
the information in Part A of this
Assignment

5|P a g e

PART 2B (10 marks)

CONSOLIDATIONS ASSIGNMENT

One submission per GROUP

Acquisition of Strongini Ltd
On 1st January 2X11, Heuston Ltd acquired 80% of the ordinary share capital (ex div) of Strongini
Ltd for $3,200,000. At this date, the accounts of Strongini Ltd included the following balances:
Share capital (1,000,000 shares) $1,000,000
General reserve
800,000
Retained profits
500,000
All of the identifiable net assets of Strongini Ltd were recorded at fair value except for Land which
had a fair value of $300,000 above the carrying amount. Adjustments for the differences are made
on consolidation and tax-effect entries are needed.

The following is a list of the transactions between the companies for the year
ended June 2X16
(a)

On 1st July 2X14, Strongini Ltd sold an item of specialised equipment to Heuston Ltd for
$180,000 at a before tax loss of $85,000. The equipment has a useful life of 5 years and is
depreciated using the straight-line method by both companies

(b)

During the year Heuston Ltd paid $15,000 of Training Fees to Strongini Ltd for additional
training required on the specialised equipment purchased from the company. This amount is
disclosed under General Administrative Expenses by Heuston Ltd.

(c)

On 1st October 2X15, Strongini sold inventory to Heuston Ltd for $350,000, at a mark-up of
50%. At 30 June 2X16, $75,000 of this inventory was still on hand.

(d)

On 28th November 2X14, Heuston Ltd sold some inventory to Strongini Ltd for $90,000, at a
profit before tax of $50,000. This was still on hand in Strongini Ltd at 30 June 2X15, but was
all sold by 30 June 2X16.

(e)

Heuston Ltd extended a loan of $100,000 to Strongini Ltd. This loan was issued on the 1st
March 2X14 payable over 5 years, with an interest rate on the loan of 3.5% pa. Interest is paid
on the 1st April and 1st October every year.

(f)

A goodwill impairment test in June 2X16 revealed the need to impair goodwill by $5,000.
Impairment of goodwill for prior years amounts to $8,000.
For consolidation purposes the partial goodwill method is used.

(g)

All dividends are recognised before receipt of cash.

(h)

The corporate income tax rate is 30% and the companies in the group have financial years
from 1st July to 30 June.

6|P a g e

Accounts for PART B of the Assignment:

Accounts
Balance Sheet Accounts
Cash and Cash equivalents
Trade Debtors (net)
Accruals & Other Receivables
Short term Cash Investments
Inventory
Goodwill and Other Intangibles
Accumulated Impairment and
Amortisation of Intangibles
Prepayments
Loans and Notes Receivable
Motor Vehicles & Truck Fleet
Accumulated Depreciation - Vehicles
Marketable Securities
Investment in Subsidiary
Dividend and Interest Receivable
Trademarks & Patents (net)
Debentures in Other Companies
Deferred Tax Asset
Property, Plant and Equipment
Accumulated Depreciation - PPE
Land
TOTAL
Deferred Tax Liability
Tax Payable
Dividends Payable (Ordinary Shares)
Dividends Payable (Pref Shares)
Trade Creditors
Other Liabilities & Provisions
Loans and Notes Payable
Debentures (4.5%)
Issued Share Capital ($1 ORD A shares)
Issued Share Capital ($1 Preference shares)
General Reserve
Other Capital Reserve
Retained Profits (c/b)
Total Liabilities & Equity
7|P a g e

Heuston Ltd

Strongini Ltd

30/06/2X16

30/06/2X16

$4,628,890
$5,708,250
$1,250,000
$2,200,000
$899,030
$1,022,800

$1,845,890
$1,409,540
$142,960
$0
$549,410
$0

-$2,000
$2,270,950
$900,000
$2,018,250
-$333,010
$370,010
$3,200,000
$955,860
$17,584,850
$2,044,500
$252,420
$13,875,460
-$4,625,150
$7,247,970
$61,469,080

$0
$12,490
$850,000
$1,821,040
-$183,150
$203,500
$0
$52,570
$3,671,630
$0
$138,320
$2,631,500
-$526,300
$2,536,380
$15,155,780

$2,403,040
$628,690
$1,537,450
$27,500
$7,010,000
$2,737,500
$900,000
$2,368,080

$599,850
$578,220
$125,000
$9,000
$1,938,300
$3,401,110
$1,150,000
$2,300,000

$15,374,500
$550,000
$5,059,000
$21,067,990
$1,805,330
$61,469,080

$1,000,000
$450,000
$1,703,710
$1,027,550
$873,040
$15,155,780

Accounts for PART B of the Assignment:

Profit and Loss Accounts

Heuston Ltd
30/06/2X16

Strongini Ltd
30/06/2X16

Sales and Other Revenue

$9,934,100

$3,313,830

Stock at start
Purchases
Stock at end
Cost of Goods Sold

$555,010
$4,613,700
-$899,030
$4,269,680

$305,260
$1,384,110
-$549,410
$1,139,960

Gross Profit
Less Expenses
Expenses from Business Operations
General Administration Expenses
Depreciation & Amortisation Expenses
Impairment Expenses
Finance Costs
Total Expenses
Add Other Income
Dividend and Interest Revenue
Other Income & Disposal of Assets

$5,664,420

$2,173,870

$1,235,100
$808,400
$1,750,000
$415,000
$303,600
$4,512,100

$860,500
$444,660
$452,830
$87,000
$15,690
$1,860,680

$1,756,150
$235,000
$1,991,150

$415,880
$487,500
$903,380

Net Profit before Tax

less Income Tax Expense
Net Profit after Tax
Add
Retained Profits (o/b)
Total Available
Less Appropriations
Interim Ordinary Dividends Paid
Transfer to General Reserve
Dividends (Preference) Proposed
Dividends (Ordinary) Proposed
Total Appropriations

$3,143,470
-$628,690
$2,514,780

$1,216,570
-$578,220
$638,350

$1,988,490
$4,503,270

$713,600
$1,351,950

$614,980
$518,010
$27,500
$1,537,450
$2,697,940

$60,000
$284,910
$9,000
$125,000
$478,910

Retained Profits (c/b)

$1,805,330

$873,040

8|P a g e

REQUIRED:
Consolidate Heuston Ltd and Strongini Ltd:
(a)

Prepare the consolidation journal entries, with narrations, and

consolidated worksheet (using Excel or similar) to consolidate HEUSTON Ltd
and STRONGINI Ltd for the year ended 30th June 2X16.

(b)

Produce the completed Consolidated Financial Reports (Statement of

Comprehensive Income and Statement of Financial Position) for the year
ended 30th June 2X16.
In preparing the financial statements for this assignment, you are advised to
comply with AASB standards and the requirements in the Australian
Corporations Legislation when determining the structure and presentation
requirements for the financial reports.

PART B:

Submission Instructions (HARD COPY)

:
Part B is to be submitted as a HARD Copy in a Folder.
Include the following:
o
o
o

o
o
o

A Cover Sheet with names and student ID numbers for all members of the
team
Consolidation Journal Entries (with all workings clearly shown)
Consolidation Worksheet (generally as a print-out of an Excel Spreadsheet)
Consolidated Financial Reports
One submission per GROUP
Due Date: Monday 17 OCTOBER 2016 by 5:30pm
(Information about an Assignment Submission Box will be made available closer to the
due date)

9|P a g e