Accounting at Ford Ltd and Ghia Ltd - Math Problem Example

Running head: Accounting; Ford Ltd and Ghia Ltd Topic [Writer’s Name] [Institute’s Name] Ford Ltd and Ghia Ltd Assignment extract: It is an accounting case study as problem that has to be solved and required a Journal Entries, worksheet, and consolidation financial statement that should be presented as the example  Solution for the year ended 31 December 20X8 Following is the calculation regarding the acquisition analysis of Ghia Ltd. Acquisition analysis of Ghia Ltd $ Fair value of identifiable net assets acquired = 200 000 Share capital 300 000 General reserve 150 000 Retained profits Fair value purchased (3.20% x $200 000) = $ 640 000 Purchase consideration = $ 150 000 Goodwill on acquisition = $ 000 000 Debit Credit $ $ (1) Elimination of investment in Ghia Ltd Share capital (4% x 200 000) 800 000 Retained profits 265 000 Share in Ford Ltd 1065000 (2) Elimination of inter-company sales of inventory Sales 300 000 Purchases 300 000 (3) Elimination of unrealised profit in opening inventory Retained profit 1 July 20X2 265 000 Opening inventory 265 000 Income tax expense ($345000 x 30%) 103 500 Retained profit 103 500 (8) Elimination of interim dividend paid Dividend received from Ghia Ltd ($0.30 x 200 000) 60 000 Interim dividend 60 000 (9) Elimination of final dividend proposed Dividend payable (liability) (80% x 20 500) 130 000 Proposed dividend 130 000 Consolidation journals for the year ended 31 December 20X8 Consolidation worksheet for the year ended 31 December 20X8 Amount Ford Ltd Ghia Ltd   Eliminations Consolidation   Debit   Credit   $   $     $   $  $   Sales   4640,000     1850,000     300,000 (1)         6190,000   Cost of Sales    2210,000      875,000                     Purchases    75,000                  300,000(1)      225,000 Gross Profit   2430,000     975,000                 3405,000   Dividend received from Ghia Ltd       130,000     60,000 (2)         -   Total income   1525,000     765,000                 2290,000   Total operating expenses   2057,000     300,000                 2357,000   Operating profit before tax   625,000     675,000                 202,875   Income tax expense   280,000     260,000     103,500 (3)     436,500   Operating profit after tax   345,000     315,000                 660,000   Retained profits   325,000     265,000       103,500 (3)    486,500   Interim dividend   (100,000)     (150,000)           60,000 (2)   (190,000)   Proposed dividend   (160,000)     (200,000)           16,400   (343,600)   Share capital   1200,000     200,000     800,000 (1)         600,000   Current liability   60,000     180,000                 24,000   Total equities   1525,000     765,000                 2290,000   Shares in Ghia Ltd     200,000           800,000(1)   -   Total non-current assets   1360,000     750,000                 2110,000   Minority interest is calculated as follows: MI share of operating profit after tax $ Operating profit after tax 415,000 Less Unrealised profit in closing inventory after tax 000 Add Profit in opening inventory after tax now realised 000 Less Debenture interest received 000 415,000 Minority interest 415,000 MI share of retained profits 1 July 20X2 Retained profit 1 July 20X2 265,000 Less Unrealised profit in opening inventory after tax 000 265,000 Minority interest 000 MI share of dividend paid (0.30 x 200,000) 60,000 MI share of proposed dividend 200,000 MI share of retained profits 30 June 20X3 (13,340+3,240-1,700-4,100) $10,780 MI share of share captial (20% x 200,000) 40,000 MI share of general reserve (20% x 300,000) 60,000 Consolidated income statement for the year ended 31 December 20X8 Ghia Ltd Economic Entity  Consolidated Income Statement for the year ended 30 June 20X3 Sales 1850 Cost of sales 875 Gross profit 975 Dividend revenue     - 975 Expenses 300 Operating profit before tax 675 Income tax expense    260 Operating profit after tax 415 $0 Retained earnings at 1.1.X8 200 Profit for the year 415 Interim dividend -150 Final dividend declared   (200) Retained earnings at 31.12.X8     265 Consolidated balance sheet for the year ended 31 December 20X8 Assets Current assets     385     395 Total current assets     395 Non-current assets     550     750     810         - Total non-current assets     750 Total assets 1145 Liabilities Current liabilities 60 180 Provisions     200 Total current liabilities     380 Total liabilities     380 Net assets     765 Shareholder’s equity Share capital 200 Capital profits reserve     300 Retained earnings     265 Total equity     765 Solution for the year ended 31 December 20X8 Following is the calculation regarding the acquisition analysis of Ford Ltd. Acquisition analysis of Ford Ltd $ Fair value of identifiable net assets acquired = 1200 000 Share capital 000 000 General reserve 240 000 Retained profits Fair value purchased (4.0% x $200 000) = $800 000 Purchase consideration = $150 000 Goodwill on acquisition = $ 000 000 Consolidation journals for the year ended 31 December 20X8 Debit Credit $ $ (1) Elimination of investment in Ghia Ltd Share capital (4% x 200 000) 800 000 Retained profits 265 000 Share in Ford Ltd 1065000 (2) Elimination of inter-company sales of inventory Sales 300 000 Purchases 300 000 (3) Elimination of unrealised profit in opening inventory Retained profit 1 July 20X2 265 000 Opening inventory 265 000 Income tax expense ($345000 x 30%) 103 500 Retained profit 103 500 (8) Elimination of interim dividend paid Dividend received from Ghia Ltd ($0.30 x 200 000) 60 000 Interim dividend 60 000 (9) Elimination of final dividend proposed Dividend payable (liability) (80% x 20 500) 130 000 Proposed dividend 130 000 Consolidation worksheet for the year ended 31 December 20X8 Amount Ford Ltd Ghia Ltd   Eliminations Consolidation   Debit   Credit   $   $     $   $  $   Sales   4640,000     1850,000     300,000 (1)         6190,000   Cost of Sales    2210,000      875,000                     Purchases    75,000                  300,000(1)      225,000 Gross Profit   2430,000     975,000                 3405,000   Dividend received from Ghia Ltd       130,000     60,000 (2)         -   Total income   1525,000     765,000                 2290,000   Total operating expenses   2057,000     300,000                 2357,000   Operating profit before tax   625,000     675,000                 202,875   Income tax expense   280,000     260,000     103,500 (3)     436,500   Operating profit after tax   345,000     315,000                 660,000   Retained profits   325,000     265,000       103,500 (3)    486,500   Interim dividend   (100,000)     (150,000)           60,000 (2)   (190,000)   Proposed dividend   (160,000)     (200,000)           16,400   (343,600)   Share capital   1200,000     200,000     800,000 (1)         600,000   Current liability   60,000     180,000                 24,000   Total equities   1525,000     765,000                 2290,000   Shares in Ghia Ltd     200,000           800,000(1)   -   Total non-current assets   1360,000     750,000                 2110,000   Minority interest is calculated as follows: MI share of operating profit after tax $ Operating profit after tax 345,000 Less Unrealised profit in closing inventory after tax 000 Add Profit in opening inventory after tax now realised 000 Less Debenture interest received 000 345,000 Minority interest 345,000 MI share of retained profits 1 July 20X2 Retained profit 1 July 20X2 325,000 Less Unrealised profit in opening inventory after tax 000 325,000 Minority interest 000 MI share of dividend paid (0.30 x 200,000) 60,000 MI share of proposed dividend 130,000 MI share of retained profits 30 June 20X3 (13,340+3,240-1,700-4,100) $10,780 MI share of share captial (20% x 200,000) 40,000 MI share of general reserve (20% x 300,000) 60,000 Consolidated balance sheet for the year ended 31 December 20X8 Sales 4640 Cost of sales 2210 Gross profit 2430 Dividend revenue   252 2682 Expenses  2057 Operating profit before tax 625 Income tax expense    280 Operating profit after tax 345 Ford Ltd $0 Retained earnings at 1.1.X8 240 Profit for the year 345 Interim dividend -100 Final dividend declared   (160) Retained earnings at 31.12.X8     325 Consolidated balance sheet for the year ended 31 December 20X8 Balance sheets Ford Ltd $0 Assets Current assets Other current assets Total current assets     385 Non-current assets Property, plant and equipment Investments Total non-current assets   1360 Total assets 1745 Liabilities Current liabilities Trade and other payables Provisions     160 Total current liabilities     220 Total liabilities     220 Net assets   1525 Shareholder’s equity Share capital 1200 Capital profits reserve         - Retained earnings     325 Total equity   1525 Read More