College of Business, Hospitality and Tourism Studies

School of Accounting
ACC601 CORPORATE ACCOUNTING

MAJOR ASSIGNMENT (20%)

Trimester 2, 2015

Instructions:

This assignment carries 20% towards your total coursework.

All assignments should be typed (Font type: Times New Roman, font size: 12 and alignment:
justified) and with proper referencing.

Only original work is to be submitted. Copied assignments will get a zero mark.

Plagiarism is a serious issue. Any student found plagiarizing their work will be given zero
marks and will be subject to disciplinary actions.

Late assignments will be penalized at a rate of 10% per day.

Due Date: Thursday, 30th July, 2015.

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QUESTION 1

[5%]

Conduct a journal review in order to answer the following questions:

1. Which entities should be required to prepare financial reports that are subject to regulation?
Why? How would you frame an appropriate rule that directs any entity to comply with a
particular set of regulations?
2. Identify the costs and benefits of preparing financial reports for small businesses. What
conclusions can you draw regarding optimum disclosures for small and medium entities?
Note:
Take note of the following in terms of answering this question:
- Proper references (including in text referencing/citation) should be provided for all the
scholarly articles used to write answers.
- Answers without any proper reference will be deemed as copy and paste from the
internet and will automatically attain zero marks!!!

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QUESTION 2

[15%]

Western Ltd acquired 75% of the shares of Quoll Ltd on 1 July 2012. In exchange for these share Western
Ltd gave a consideration of $26 000 cash and 10 000 shares in Western Ltd, these having a fair value of $2
each. At this date the shareholders equity of Quoll Ltd consisted of:
Share capital (15 000 shares)
Retained earnings

$ 45 000
9 000

At this date all the identifiable assets and liabilities of Quoll Ltd were recorded at amounts equal to their fair
values except for plant for which the fair value was $2000 greater than the carrying amount of $25 000
(original cost was $35 000). The plant was expected to have a further 5-year life. The fair value of the noncontrolling interest at 1 July 2012 was $15 000. Western Ltd uses the full goodwill method. The tax rate is
30%.
Assets held by Quoll Ltd at 30 June 2017 include financial assets. Gains and losses on these assets are
recognised in other comprehensive income. During the 201617 year Quoll Ltd recorded gains of $1500 on
these assets. Financial information supplied by the two companies at 30 June 2017 was as follows:
Western Ltd Quoll Ltd
Sales revenue
$75 000 $118 000
Interest revenue
375
1 000
Dividend revenue
2 700
1 000
78 075
120 000
Cost of sales
(51 000)
(87 750)
Financial expenses
(2 250)
(3 000)
Selling expenses
(6 000)
(9 000)
Other expenses
(2 250)
(2 250)
(61 500) (102 000)
Profit before tax
16 575
18 000
Income tax expense
(7 500)
(8 200)
Profit for the year
9 075
9 800
Retained earnings (1/7/16)
28 900
21 700
37 975
31 500
Dividend paid
(4 000)
(3 600)
Retained earnings (30/6/17)
33 975
27 900
Share capital
60 000
45 000
Other components of equity

7 500
Total equity
93 975
80 400
Current liabilities
12 750
4 350
Non-current liabilities: Loans

7 500
Total liabilities
12 750
11 850
Total equity and liabilities
$106 725
$92 250
Plant
Accumulated depreciation
Shares in Quoll Ltd
Loans from Quoll Ltd
Inventory
Cash
Financial assets
Deferred tax assets
Total assets

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45 000
(25 500)
46 000
3 750
13 400
21 075
0
3 000
$106 725

90 000
(45 750)
0
0
23 250
750
16 500
7 500
$92 250

Additional information
(a) At 1 July 2017, Western Ltd held inventory that had been sold to it by Quoll Ltd in the previous year at
a profit of $1200.
(b) During the 201617 year, Quoll Ltd sold inventory to Western Ltd for $28 500. At 30 June 2017,
Western Ltd still had on hand inventory that had been sold to it by Quoll Ltd for a profit of $1800
before tax.
(c) Interest of $375 was paid by Western Ltd to Quoll Ltd on both 30 June 2016 and 30 June 2017.

Required:
A. Prepare the journal entries to effect the consolidation.
B. Prepare the consolidation worksheet.
C. Prepare the Statement of Comprehensive Income and the Statement of Changes in Equity
for the group for the year ended 30th June 2017.
D. Prepare the Statement of Financial Position as at 30th June 2017.

THE END

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