Accountancy Class Test Questions

This examination paper must be returned. Candidates are not permitted to remove this paper from the examination room. STUDENT NUMBER†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ STUDENT'S NAME†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ First name Last name SIGNATURE†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ MACQUARIE UNIVERSITY Semester 2, 2010 IN-CLASS TEST NO 2 Unit: ACCG308 CORPORATE ACCOUNTING AND REPORTING Time allowed: Total number of questions: Instructions: 45 minutes ONE This is a closed book examination. You are not permitted to access any books, notes or other written m aterials. Silent calculators, nonprogrammable are allowed.Questions must be answered on the examination paper. Answer all parts of all questions. (Office Use Only – Do Not Write Here) Total /25 Question 1 (25 marks) On the 1 July 20X6 Howard Ltd gained control of Carter Ltd by buying 70% of its shares for $70,000. At this date, Carter had share capital $50,000 and retained profits $30,000. Additional information: ? Goodwill impairment is $500 in year ended 20X8 and $850 in 20X9. ? ? Dividends are paid out of current period profit. The dividends were paid before year-end. Inventory purchases by Howard from Carter during the current year amounted to $30,000.Their cost to Carter was $20,000. Howard still holds $18,000 of this inventory at year-end. Loan from Carter attracts 12% interest per annum. The interest was paid before year-end. Included in other assets of Howard is equipment purchased from Carter on the 1 July 20X7 for $41,000. The equipment was four years old when sold, had cost Carter $50,000 to buy, with expected residual value $5,000, and had been depreciated 10% p. a. straight-line. Howard depreciates the equipment (after deducting the same residual) straight-line over the remaining six-year life. ? ? Required: Complete the consolidation worksheet on the next page.Note: 1. Marks are awarded for each correct individual worksheet entry. 2. For the eliminations column only, entries that are placed in a location where there should not be any entry may attract a penalty mark. 2 Workings: Elimination 1: Substitution. Deletes 70% of subsidiary's pre-control equity. Capital: 50 000 * 0. 7 = 35 000 Retained profits: 30 000 * 0. 7 = 21 000 Investment in subsidiary: 70 000 Goodwill: 14 000 Recognise goodwill impairment (prior and current years) Dr Goodwill impairment expense 850 Dr Retained profits 500 Cr Accumulated Goodwill impairment 1 350 Deletes intra-group dividend revenue and appropriation. 5 000 * 0. 7 = 10 500 Dr Dividend revenue 10 500 Cr Divid end 10 500 Deletes intra-group sales. Dr Sales Cr Cost of sales Elimination 2: Elimination 3: Elimination 4: 30 000 30 000 Elimination 5: Deletes profit on intra-group sale from inventory valuation (Current year). (18 000/30 000) * (30 000-10 000) Dr Cost of sales 6 000 Cr Inventory 6 000 Deletes intra-group loan Dr Loan from Carter Cr Loan to Howard Elimination 6: 50 000 50 000 Elimination 7:Deletes interest from intra-group loan Dr Interest revenue 6 000 Cr Interest expense 6 000 Deletes profit on intra-group sale of equipment and reinstates equipment carrying amount at sale date Dr Retained profits 9 000 Dr Equipment 9 000 Cr Accumulated depreciation 18 000 Add back inflated depreciation (2 years) of equipment arising from intragroup sale of equipment 6 000 – 4 500 = 1 500 p. a. Dr Accumulated depreciation 3 000 Cr Depreciation expense 1 500 Cr Retained profits 1 500 Elimination 8: Elimination 9: 3 NCI calculations: Net profit: 0. 3 * (18 000 – 6 000) = 3 600 â€⠀œ 6 000 = subtract profit on intra-group sale of inventoryRetained profits: 0. 3 * (38 000 – 9 000) = 8 700 – 9 000 = subtract profit on intra-group sale of equipment Dividend: 0. 3 * 15 000 = 4 500 Capital: 0. 3 * 50 000 = 15 000 Parent interest = Group interest – NCI 4 Combined consolidation worksheet as at 30 June 20X9 Howard Carter Sum Eliminations Dr Cr 30 000 4 6 000 5/4 Group Allocation to NCI Parent Sales COGS Gross profit Other revenues Other expenses 94 000 57 000 ______ 37 000 17 000 22 000 ______ 32 000 26 600          ______ 58 600 27 000 31 600 90 000 121 600 50 000 12 000 30 000 ______ 213 600 45 000 70 000 – 98 600    ______ 213 600 2 000 176 000 36 000 93 000 ______ ______ 46 000 83 000 6 000 23 000 34 000 ______ 18 000 38 000 56 000 ______ 50 000 64 600 146 000 30 000 69 000 77 000 10 500 6 000 850 3 7 2 7 9 1 2 8 9 3 6 500 6 000 1 500 49 350 34 150 Net profit Opening retained profits 3 600 30 550 21 000 500 9 000 Profit availab le less Dividends Retained profits Capital Owners' equity Loan from Carter Other liabilities Accum depreciation Accum goodwill impairment Total equities + liabilities ______ ______ 56 000 114 600 15 000 42 000 41 000 72 600 50 000 140 000 91 000 212 600 – 25 000 28 000 50 000 37 000 58 000 5 000 1 1 500 35 600 69 750 10 500 31 500 38 250 105 000 143 250 – 37 000 18 000 73 000 1 350 1 350 254 600 8 700 26 900 12 300 57 450 4 500 27 000 7 800 30 450 15 000 90 000 22 800 120 450 50 000 6 8 9 2 3 000 ______ ______ 144 000 357 600 26 000 – 50 000 71 000 70 000 50 000 Inventory Investment in Sub Loan to Howard Consolidation goodwill Other assets 5 1 6 1 8 6 000 65 000 70 000 – 50 000 – 14 000 175 600 ______ ______ 194 850 254 600 Total assets 14 000 68 000 166 600 9 000 ______ ______ ______ 144 000 357 600 194 850 5