ACC601 CORPORATE ACCOUNTING MAJOR ASSIGNMENT (20%) Trimester 2, 2015

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 2016–17 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 45 000 90 000
Accumulated depreciation (25 500) (45 750)
Shares in Quoll Ltd 46 000 0
Loans from Quoll Ltd 3 750 0
Inventory 13 400 23 250
Cash 21 075 750
Financial assets 0 16 500
Deferred tax assets 3 000 7 500
Total assets $106 725 $92 250
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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 2016–17 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.