ACCT -Anigamct- Dealie Stenben 1L Submit hard copy in the class on Monday 11 Dec
ID: 2592659 • Letter: A
Question
ACCT -Anigamct- Dealie Stenben 1L Submit hard copy in the class on Monday 11 December Below are the Balance Sheets of Alpha, Beta and Gamma Ltd for the year to 31 December 2007 Gamma AlphaBeta 450 300 80 50 Plant Assets Investment in: 153 50 30 40 170 197 110 180 1330 200 95 348 40 A/R Cash Total Assets 14 A/P 100 Share capital Retained earnings Total liabilities and equity 430 1330 200 10856 348 170 Alpha bought 75% of the share capital of Beta on 1/1/2006 when Beta's retained earnings were £60 Alpha bought 80% of the share capital of Gamma on 1/1/2007 when Gamma's retained earnings were £32. i) i) The inventory of Alpha includes inventory bought from Beta for £50. Beta sold this inventory at cost plus a 25% mark-up. All the inventory remains unsold by Alpha. iv) In 1/1/2007, Alpha sold a plant asset to Beta for £80. It had originally purchased it in 2001 for £100. It used straight-line depreciation based on a life of ten years (including full year depreciation in year of purchase). Beta depreciates this asset over its remaining life using straight line method. v) The A/R of Alpha includes £10 due for Beta. Beta paid back this amount on 22 December 2007, but Alpha has not entered this into its accounts yet. The goodwill on the acquisition of Gamma has been impaired by an estimated 50% in 2007. v) Required:Explanation / Answer
1. Consolidated Balance Sheet:
Consolidated Balance Sheet of Alpha and its subsidiaries as of Dec 31, 2007
Plant Assets
550
Investment in
Beta
0
Gamma
0
Inventory
349.5
A/R
295
Cash
163
Goodwill
128.7
Total Assets
1486.2
A/P
254
0
Share Capital
700
RE
426.5
NCI
105.7
Total Liabilities and Equity
1486.2
Consolidated Worksheet
For the year ending December 31, 2007
Accounts
Alpha
Beta
Gamma
Consolidation entries
Non controlling Interest
Consolidated Totals
Debit
credit
Plant Assets
450
80
50
30
550
Investment in
Beta
300
300
0
Gamma
153
153
0
Inventory
197
110
50
7.5
349.5
A/R
180
95
30
10
295
Cash
50
63
40
10
163
Goodwill
128.7
128.7
Total Assets
1330
348
170
138.7
500.5
0
1486.2
A/P
200
40
14
254
0
Share Capital
700
200
100
300
700
RE
430
108
56
153.2
0
-14.3
426.5
NCI
105.7
105.7
Total Liabilities and Equity
1330
348
170
453.2
0
91.4
1486.2
Workings:
1. Inventory Elimination:
2.
(The above would mean that fixed assets and RE will increased by 10)
3. Investment in subsidiary elimiation:
The entire amount invested in Subsidiary is eliminated
4. Equity Elimination:
Entire Amount of Sharecapital in Beta and gamma are eliminated
5. Goodwill calculation:
6. NCI as of Dec 31, 2007:
NCI share of post acquisition earnings in removed as well = 9.5+4.8 = 14.3
7. Retained Earnings:
Journal entry to record payment made by Beta
Cash Dr 10
To Accounts Receivable 10
Work sheet entry:
Consolidated Balance Sheet of Alpha and its subsidiaries as of Dec 31, 2007
Plant Assets
550
Investment in
Beta
0
Gamma
0
Inventory
349.5
A/R
295
Cash
163
Goodwill
128.7
Total Assets
1486.2
A/P
254
0
Share Capital
700
RE
426.5
NCI
105.7
Total Liabilities and Equity
1486.2
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