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Exercise 21

Accounting

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Exercise 21.7 Consolidation worksheet Cepheus Ltd gained control of Aquarius Ltd by acquiring its share capital on 1 January 2013. The statement of financial position of Aquarius Ltd at that date showed: Land £ 20,000 Liabilities £ 15,000 Plant and machinery 120,311) Share capital 60111) Accumulated depreciatiOn (20,000) Retained earnings 4011]) Inventory w Asset revaluation surplus M ——— moon At 1 January 2013, the recorded amounts of Aquarius Ltd's assets and liabilities were equal to their fair values except as follows: : ammo»: Plant and machinery £100,000 £102,000 Inventory 15,000 13,000 Half of this inventory was sold by Aquarius Ltd in the following 12 months. The depreciable assets have a further 5—year life, bene?ts being received evenly over this period. Any business combination valuation adjustments are made on c0nsolidati0n. The tax rate is 30%. At 31 December 2013, the following information was obtained from both entities: mm mm Land — £ 20,000 Plant and machinery £575,000 120,000 Accumulated depreciation (20,000) (25,000) Inventory 15,000 23,000 Investment in Aquarius Ltd 130 000 : Total assets £700,000 £138,000 Total liabilities £ 42,000 £ 4,000 Profit before tax 100,000 15,000 Income tax expense (20,000) (5.000) Profit for the year 80,000 10,000 Retained earnings (Ill/'13) 103 000 M mom some Retained earnings (31/ l2J13) 183,000 50,000 Shane capital 445,000 60,000 Retained earnings 173,000 46,000 Asset revaluation surplusf M M memo was * This reserve relates to certain items of plant. At 1/ 11' 13, the balances of the account were £15 000 for Cepheus Ltd and £20 000 for Aquarius Ltd. Required Prepare the consolidated ?nancial statements (Statement of pro?t and loss and other comprehensive income & Statement of financial position) for Oepheus Ltd at 31 December 2013. 2. Prepare the valuatiou and pre—acquisition entries at 31 December 2017.