ACCT 001 Lecture Notes - Lecture 13: Subledger, Debits And Credits, Accounts Receivable

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taupesardine275

17 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

skaff

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Document Summary

Asset that occurs when a service has been provided but cash will not be received until the following period. Cash (contra account) is the sum of the physical cash on hand and the multiple bank accounts held by the company. Value of all these accounts as control accounts is that the amounts in them should be supported by or reconcilable to detailed lists or subsidiary ledgers or some such background data. Most accounts receivables are recognised but not collected revenue. Net realisable value is the amount expected to be collected. Often uncertainty in collection, can be difficult. If collectable amount is expected to be lower than originally anticipated, the receivable must be reduce to an estimated collectable amount. Gross accounts receivable minus the allowance for doubtful debts. The allowance functions to adjust the net value down to the lower of cost and the current estimated collectable amount. On the balance sheet accounts receivable are valued at this net amount.

Related Questions

QUESTION 21 A journal entry for a $75 payment for Rent expensewas posted as a debit to Salary expense and a credit to Cash. Thiserror will cause which of the following conditions on the trialbalance? A. The sum of the credits will equal the sum of thedebits. B. The sum of the debits will exceed the sum of the creditsby $75. C. The sum of the credits will exceed the sum of the debitsby $150. D. The sum of the debits will exceed the sum of thecredits by $150.

QUESTION 22 The business receives cash from a customer that isowed to the company "on account," based on services rendered to thecustomer previously. How does the collection of the cash affect theaccounting equation? A. Assets increase; owner's equity increases.B. Assets increase; liabilities increase. C. Assets decrease;owner's equity decreases. D. One asset increases; one assetdecreases

QUESTION 23 A business completes service to a client and sendsout a sales invoice. The amount will be collected from the customerat a later time. Which of the following would be TRUE at the timewhen the invoice is sent out? A. Total assets will decrease. B. Netincome will increase. C. Owner's equity will decrease. D. Totalliabilities will increase.

QUESTION 24 Which of the following accounts increases with adebit? A. Cash B. Interest Payable C. Accounts Payable D. Smith,Capital

QUESTION 25 The Accounts Receivable account of Nuptials Inc. isshown below. Accounts Receivable Dr Cr 26,000 3,500 5,000 Calculatethe ending balance of the account. A. $33,500 debit B. $31,000,debit C. $3,500, credit D. $27,500, debit

QUESTION 26 The following transactions for the month of Marchhave been journalized and posted to the proper accounts. Mar. 1Martinez invested $9,000 cash in his new design services business.Mar. 2 Paid the first month's rent of $800. Mar. 3 Purchasedequipment by paying $3,000 cash and executing a note payable for$5,000. Mar. 4 Purchased office supplies for $750 cash. Mar. 5Billed a client for $10,000 of design services completed. Mar. 6Received $8,000 on account for the services previously recorded.What is the balance in Cash? A. $13,250 B. $12,450 C. $15,450 D.$14,000

QUESTION 27 Which of the following sequences states the order inwhich a trial balance lists accounts? A. Equity â Assets âLiabilities B. Liabilities â Assets â Equity C. Assets â Equity âLiabilities D. Assets â Liabilities â Equity

QUESTION 28 Which of the following statements is FALSE? A. Atrial balance shows total amounts for assets, liabilities, andequity. B. A trial balance is created before the balance sheet isprepared. C. A trial balance presents data in debit and creditformat, but a balance sheet does not. D. A trial balance showstotal debits and total credits.

QUESTION 29 A promise received from a business's customers topay for goods and services that they received from the business iscalled a(n): A. revenue. B. account receivable. C. account payable.D. expense.

QUESTION 30 You can evaluate the economic resources, debt, andoverall financial position of a company in which of the followingfinancial statements? A. Income statement B. Balance sheet C.Statement of owner's equity D. Statement of cash flows

QUESTION 31 A book holding all of the accounts is called the: A.income statement. B. journal. C. ledger. D. balance sheet.

QUESTION 32 Which of the following groups of accounts BOTHnormally have a debit balance? A. Assets and Liabilities B.Liabilities and Owner's equity C. Revenues and Expenses D. Assetsand Expenses

QUESTION 33 A business buys $500 of supplies on account. Whichaccount is debited? A. Supplies B. Cash C. Service revenue D.Accounts payable

Narrative andInstructions

Rockford Corporation is awholesale plumbing supply distributor. The corporation wasorganized
in 1981, under the laws of theState of Illinois, with an authorized capitalization of 10,000shares
of no-par common stock with astated value of $18 per share. The common stock is sold overthe
the counter in the local area.You have been hired as of Thursday, December 25, 2014, to replacethe
controller, who has resigned.As controller, you are responsible for the corporation'saccounting
recrods, preparation of thefinancial statements, safeguarding the corporate assets, andproviding
management with financialinformation to set prices and to monitor and controloperations.

Rockford Corporation closesits books annually on December 31 but prepares financialstatements
quarterly. Adjusting entriesare posted to the general ledger only at year-end; at the end ofthe
first, second, and thirdquarter the adjustments are entered only on a work sheet, not inthe general
ledger. Therefore, theadjusting entries to be recorded on December 31 are annualadjustments that
you must journalize and thepost to the general ledger accounts before preparing thefinancial
statements.

Rockford Corporation maintainsa perpetual inventory system and takes a physical count eachyear
to adjust the inventorycarrying amount. Purchases are recorded at the gross amount(discounts
taken are recognized at thedate of payment) of the supplier's invoice, and the terms varywith
each supplier. Sales onaccount are subject to terms of 1/10, n/30. Discounts are taken andgranted
only when the terms are met.The cost of all inventory sold in December was 65% of the salesprice.
The corporation uses thefollowing journals and ledgers:

Journals
1. A sales journal (S) - torecord sales of merchandise on account.
2. A purchase journal (P)- torecord purchases of merchandise on account.
3. A cash receipts journal(CR) - to record all cash receipts.
4. A cash disbursementsjournal (CD) - to record all cash payments.
5. A general journal (J) - torecord all transacitons that cannot be recorded in the otherjournals.

Ledgers
1. A general ledger
2. An accounts receivablesubsidiary ledger.
3. An accounts payablesubsidiary ledger.

In recording salestransactions, each sale should be posted on the day of the saledirectly to the
customer's account in thesubsidiary ledger, using the invoice number as the postingreference
number in the subsidiaryaccount. Also, cash receipts from customers should be posted tothe
subsidiary ledger on the daythey are received. The purchase order number should be used as
the posting reference numberin the subsidiary ledger for purchases on account fromsuppliers.
Purchases from suppliers andpayments to them should be posted daily. All other individualposting
may be made weekly or at themonth-end. Account numbers should be used as posting reference
numbers in the journals.Officers and office personnel are salaried employees and are paidmonthly
on the last day of each month.The delivery truck drivers and warehouse employees are hourlywage
employees and are paidbiweekly. Each biweekly pay period ends Friday. On the followingMonday
you assistants provide youwith a payroll summary from which you prepare general journalentries
to record the biweekly payrolland the employer's taxes on the payroll. The biweeklyemployees'
paychecks are distributed onthe following day (Tuesday).

The January 1, 2014, balancesappear in the general ledger accounts as well as the Noverber 30,2014,
balances, for those accountswhose balances have changed. All transacitons affecting thenon-
current accounts from January1, 2014, through Noverber 30, 2014, with explanations, appearin
these accounts to facilitatethe preparation of the statement of cash flows.

Subsidiary ledger accountbalances as of Noverber 30, 2014, are as follows:

Accounts Receivable			Acct No	Amount
Boecker Builders			117	62,920
The Potts Company			122	46,300
Swanson BrothersContruction			133	22,590
A & B Hardware			143	-
Trudy's Plumbing			155	15,500
Coconino Contractors Inc			160	28,700
Rankin Plumbing Corp			166	74,350
Beverly's BuildingProducts			175	13,600
Bilder Construction Co			180	48,900
Iwanaga Plumbing andHeating			190	5,800
Total				318,660

Accounts Payable			Acct No	Amount
Phoenix Plastics			14	19,280
Business Basics Inc			16	-
Edward's PlumbingSuppliers			18	20,050
DeKalb Transport			20	-
Oxenford Copperworks			35	28,700
Smith Pipe Co			39	37,700
Ron & Rod's PlumbingProducts			44	14,850
Khatan Steel Corp			57	12,000
Total				132,580

The transactions throughDecember 23 have already been recorded by the former controller.You
are to begin your work byentering the transaction of December 25 for the payment of cashto
repurchase stock.

			Dec-14
S	M	T	W	T	F	S
	1	2	3	4	5	6
7	8	9	10	11	12	13
14	15	16	17	18	19	20
21	22	23	24	25	26	27
28	29	30	31


December Transactions
December
1	Received a check in the amount of $22,364 fromSwanson Brothers Contruction in full
	payment of invoice No. 1120 dated Novermber 26 inthe amount of $22,590.
1	Sold sewer and drainage pipe to Beverly's BuildingProducts on account, invoice No. 1201
	for $28850.
2	Purchased copper tubing and fittings from Edward'sPlumbing Supplies Inc. on account,
	purchase order No. 315 for $32660, terms n/60.
2	Issued check No. 1580 for $28,700 to OxenfordCopperworks in settlement of the
	balance owned on purchase order No. 280.
3	A court notice indicates that Iwanaga Plumbing andHeating is bankrupt and payment
	of its account improbable; the president orders theaccount to be written off as a
	bad debt (invoice No. 780).
3	Sold bathroom fixtures to Bilder Construction Co onaccount, invoice No. 1202 for
	$47,700.00
4	Received a check in the amount of $45,374 from thePotts Co in full payment of invoice
	No. 1128 dated November 27 for $46,300.
4	Sold plumbing supplies and plastic pipe to CoconinoContractors Inc. on account, invoice
	No. 1203 for $12,300.
4	Issued check No. 1581 for $720 to Standard Oil Co,in payment of gas, oil, and truck repair
	from Tierney's Standard Service.
5	Issued check No. 1582 for $11,880 to Khatan SteelCorp. in full settlement of purchase order
	No. 312 for $12,000.
5	Issued check No. 1583 for $12,054 to PhoenixPlastics in full payment of Phoenix's invoice
	dated November 28 in the amount of $12,300, forpurchase order No. 313, terms 2/10, n/30.
5	Received a check in the amount of $72,863 fromRankin Plumbing Corp. in full payment
	of invoice No. 1129 dated November 28 for$74,350.
8	Sold cast pipe to Trudy's Plumbing on account,invoice No. 1204 for $26,300.
8	Received a check in the amount of $28,700 fromCoconion Contractors, Inc. in full payment
	of invoice No. 1091 dated October 20.
8	Purchased bathroom fixtures from Phoenix Plastics,on account, purchcase order No. 316
	for $56,800 terms 1/10, n/30.
8	Received a check in the amount of $29,600 fromBoecker Builders in partial payment of
	balance outstanding covering invoice Nos. 1050 and1071.
9	The payroll summary for the biweekly pay periodended Friday, December 5 contained the
	follwing information:
	Delivery and warehouse wages				4,860
	FICA taxes withheld				410
	Federal income taxes withheld				900
	State income taxes withheld				190
		Net pay			3,360
	Employer's payroll taxes:
	FICA tax				410
	Federal unemployment tax				-
	State unemployment tax				-
	Issued check No. 1584 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were thenpreppared for distributions to the biweekly
	emplyees on Tuesday, December 9, 2014.
9	Issued check No. 1585 for $650 to Scooter Gordonfor lettering and sign painting on some
	delivery trucks.
9	Issued check No. 1586 for $6,980 to PhoenixPlastics, in payment of Phoenix's invoice dated
	November 12 in the amount of $6,980, our purchaseorder No. 299.
10	Issued check No. 1587 for $37,323 to Smith Pipe Coin full payment of their invoice dated
	November 28, terms 1/15, n/30, our purchase orderNo. 314.
10	Received a check in the amount of $15,500 fromTrudy's Plumbing in full settlement of
	invoice No. 1106 dated November 7.
10	Sold pipe, fixtures, and accessories to Trudy'sPlumbing on account, invoice No. 1205 for
	$26,850.00
11	Sold pumbing supplies and copper tubing to ThePotts Company on account, invoice No.
	1206 for $31,450.
11	Received a check in the amount of $33,320 fromBoecker Builders in full payment of invoice
	No. 1071.
11	Cash sales to date totaled $10,232.
12	Received a check in the amount of $25,774 fromTrudy's Plumbing in payment of inoivce
	No. 1204.
12	Sold plumbing fixtures and supplies to BoeckerBuilders, on account, invoice No. 1207
	for $24,730.
15	The Potts Co returned defective copper tubing thatis purchased on December 11. A credit
	memo in the amount of $5680 is issued relative toinvoice No. 1206. The copper tubing
	had a cost of $3692.
15	The defective copper tubing is returned to Edward'sPlumbing supplies, Inc. along with
	a debit memo in the amount of $3692 in reduction ofpurchase order No. 315.
15	Issud check No. 1588 for $599 in payment ofNovember telephone bill to Northern
	Illinois Communications.
16	Issued check No. 1589 in the amount of $12,360 inpayment of federal withholding taxes,
	$10,573, and FICA taxes, $1787, payable on Novembersalaries and wages; The check is
	remitted to the Winnebago County Bank as thedepository.
16	Issued check No. 1590 for $56,232 to PhoenixPlastics, Inc, in payment of purchase order
	No. 316.
17	The president informs you that Bilder ConstructionCo agrees to convert the $48900
	overdue account receivable (invoice No. 1120) to a8% note due six months from today.
17	Purchased plumbing materials from Smith PipeCompany on account, purcase order No.
	317 for $,51,120 terms 1/15, n/60.
17	Sold drain tile, plastic pipe, and copper tubing toA & B Hardware on account, invoice No.
	1208 for $7,340.
18	Sold fixtures and materials to CoconinoContractors, Inc. on account, invoice No. 1209 for
	$44,530.
18	An invoice in the amount of $1,021 was receivedfrom S. White Trucking Company for
	freight on purchase order No. 317 and paid byissuing check No. 1591.
18	Received a check in the amount of $26,582 fromTrudy's Plumbing in payment of invoice
	No. 1205.
19	Purchased office supplies from the Pen & Pad,issuing check No. 1592 in the amount of
	$1,460. (Note: Debit asset account).
19	Purchased a new Faith computer for $5600 fromBusiness Basics, Inc, purchase order
	No, 318, paying $600 down through check No. 1593with the balance due in thirty days
	(n/30). The computer has an estmated life of 4years with a salvage value of $2200.
22	Purchased bathroom and kitchen fixtures fromPhoenix Plastics, on account, purchase
	order No. 319 for $48,330, terms 1/10, n/30.
22	Received a bill from DeKalb Transport for $2580 forfreight costs incurred during the last 30
	days, terms n/30.
23	The payroll summary for the biweekly pay periodended Friday, December 19 contained the
	follwing information:
	Delivery and warehouse wages				5,770
	FICA taxes withheld				415
	Federal income taxes withheld				1,067
	State income taxes withheld				225
		Net pay			4,063
	Employer's payroll taxes:
	FICA tax				415
	Federal unemployment tax				-
	State unemployment tax				-
	Issued check No. 1594 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were thenprepared for distributions to the biweekly
	emplyees on Tuesday, December 23.

	NOTE: Transactions up to this point have beenrecorded. At this point you became
	controller and are responsible for recordign allfurther transactions.

25	The board of directors voted to purchase 2,500shares of its own stock from stockholder
	Dionne Schivone at $76 per share and issued checkNo. 1595 in payment. Stock repurchases
	are recorded at cost. Rockford is purchasing theseshares because Ms. Schivone had been
	a valuable employee.
26	The baord of directors declared a $1.25 per sharecash dividend payable on January 14 to
	shareholders of record by the end of the day ofDecember 26.
26	The president informs you that Beverly's BuildingProducts agrees to convert the $13,600
	overdue accounts receivable (invoice No. 1119)balance to a 10% note due six months from
	today.
29	A half-acre parcel of land adjacent to the buildingis acquired in exchange for 750 shares
	of unissued common stock. The land has a fair valueof $58,400 and will be used
	immediately as an outside storage lot and parkinglot.
29	An invoice in the amount of $1,860 is received fromWayne McManus, lawyer, for legal
	services involved in the acquisition of theadjacent parcel of land; check No. 1596 is issued.
29	Sold pipe and plumbing materials to BoeckerBuilders on account, invoice No. 1210 for
	$44,280
30	Issued check No. 1597 in the amount of $3,500 tothe Northern Star for adverstisement run in
	the home building supplement of December 13.
30	Issued check No. 1598 in the amount of $830 toStandard Oil Co. in payment of gas, oil,
	and truck repairs from Standard Oil Co. (useFreight-out).
30	Purchased copper and cast iron pipe from OxenfordCopperworks on account, purchase
	order No. 320 for $55,240, terms 1/10, n/30.
30	Check No. 1599 for $9,400 is issued to the bondsinking fund trustee, Chicago Trust Co.,
	for deposit in the sinking fund. (Use OtherAssets).
30	Sold plumbing supplies to Swanson BrothersConstruction on account, invoice No. 1211
	for $24,150.
31	Received a check for $24,730 from Boecker Buildersin payment of invoice No. 1207.
31	Issued check No. 1600 for $50,609 to Smith PipeCompany in payment of purchase order
	No. 317.
31	The custodian of the petty cash fund submits thefollowing receipts for reimbursement
	and reports a cash-on-hand count of $8.
	Postage stampls used (supplies)			$38
	United Parcel (freight-out)			23
	C.O.D postage (freight costs)			51
	Christmas office decorations (Misc exp)			30
	Check No. 1601 is issued and cashed to reimbursethe fund.
31	Sold an electric truck-lift to Leila Stierman Co.for $2600 cash. The original cost was
	$7900 with salvage value of $900, a life of 10years, and accumulated depreciation
	recorded through 12/31/13 is $4,550. Thestraight-line method is used. (Note: the
	company follows the practice of recording a halfyear's depreciation in the year of
	acquisition and a half year in the year ofdisposal.) First, bring the depreciation expense
	up to date in the general journal. Then journalizethe entire entry for the sale in the cash
	receipts journal.
31	Sold bathroom fixtures and plumbing supplies toTrudy's Plumbing on account, invoice
	No. 1212 for $56370.
31	Because for some time the petty cash fund has beensmaller than required for monthly
	expenditures, the fund is increased by $95 bycashing check No. 1602 and placing the
	money in the petty cash fund.
31	The payroll summary for the monthly paid employeesin submitted so that December
	checks can be distributed before the year-end; thedetails are as follows:
	Office and administrative salaries				$43,900
	Federal income taxes withheld				7,696
	State income taxes withheld				1,517
	FICA taxes withheld				3,120
		Net pay			$31,567
	Issued check No, 1603 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were preparedfor distribution to all monthly employees
	by the end of the day.
	Employer's payroll taxes:
	FICA tax (all office and administrative)				$3,120
	Federal unemployment tax				0
	State unemployment tax				0
31	Cash sale since December 12 total $42150.




Instructions
1	Make the entries in the appropriate journal forDecember 25 through December 31.
	(adjusting entries are recorded in generaljournal)
2	Post any amounts to be posted as individual amountsfrom journals to the general ledger
	and update the receivable and payable subsidiaryledger accounts.
	(only a few entries are posted for Dec, e.g.,account receivable. Please post all other entries)
3	Foot and cross-foot the columnar journals andcomplete the month-end postings of all
	books of orginal entry.

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On 1 July 2017, Panda Ltd acquired all the issued shares ofSmarty Ltd. Panda Ltd paid $250,000 more than the equity itacquired in the fair value of Smarty Ltdâs net assets. At the dateof acquisition, the shareholderâs equity of S

Share capital

100,000

Retained earnings

175,000

Total

275,000

All the assets and liabilities of Smarty Ltd were recorded atamounts equal to their fair values at the acquisition date, exceptfor some assets detailed below.

Remaining useful life

Cost

Carrying amount

Fair value

Plant

5 years

180,000

90,000

120,000

Computer equipment

5 years

90,000

40,000

60,000

Required:

Prepare the acquisition analysis at 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâs groupat 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâs groupat 30 June 2018.

Question 1

Max. marks allocated

Acquisition analysis

Consolidation entries at 1 July 2017

Consolidation entries at 30 June 2018

Presentation

Total

Question 2 [35 marks]

Topic 2: Consolidation: Intra-group transactions

On 1 July 2015, Ping Pong Ltd acquired all the issued shares ofSing Song Ltd. At the date of acquisition, the shareholdersâ equityof Sing Song Ltd consisted of share capital $120,000; generalreserve $25,000 and retained earnings $55,000. The identifiable netassets of Sing Song Ltd were recorded at amounts equal to theirfair values, except for the following assets:

Carrying amount

Fair value

Land

100,000

130,000

Inventories

78,500

86,100

Machinery (cost $86,000)

52,000

56,000

Vehicles (cost $58,000)

47,000

53,000

The assets of Sing Song Ltd at acquisition date includedgoodwill recorded at $15,000 arising from a business combinationtransaction in 2011. As at the date of acquisition, the vehiclesand machinery were expected to have a further useful life of 6 and8 years respectively, with benefits to be received evenly overthose periods. Inventories on hand on 1 July 2015 was all sold by31 January 2016. The land owned at 1 July 2015 was sold inSeptember 2016 for $150,000. The machinery on hand at 1 July 2015was sold on 1 January 2018 for $38,000.

Adjustments for the differences between carrying amount and fairvalues of assets and liabilities on hand at acquisition date arerecognised on consolidation. When assets are sold or derecognised,any related valuation reserves are transferred to retainedearnings.

At 1 July 2015, Sing Song Ltd owned but had not recorded aninternally generated brand name, an identifiable asset included aspart of the business combination transaction. This brand name wasconsidered by Ping Pong Ltd to have a fair value of $29,000 and anindefinite useful life. An impairment test conducted with respectto the brand name on 30 June 2018 concluded that its recoverableamount at that date was $2,000 less than its carrying amount.

In June 2017, Sing Song Ltd paid a share dividend worth $20,000from the general reserve on hand at 1 July 2015.

The trial balances of both companies at 30 June 2018 showed thefollowing balances:

Ping Pong Ltd

Sing Song Ltd

Dr ($)

Cr ($)

Dr ($)

Cr ($)

Sales revenue

450,000

320,000

Dividend revenue

17,000

Other income

11,400

17,000

Proceeds on sale of equipment

18,000

Proceeds on sale of machinery

38,000

Cost of sales

210,000

192,550

Income tax expense

30,000

32,000

Depreciation and other expenses

39,000

36,000

Carrying amount of equipment sold

21,000

Carrying amount of machinery sold

30,500

Dividend paid

10,000

5,000

Dividend declared

20,000

12,000

Transfer to general reserve

10,000

5,000

Share capital

200,000

140,000

General reserve

35,000

10,000

Retained earnings (1 July 2017)

51,300

67,500

Accounts payable

69,500

36,000

Loan payable (due 30 June 2022)

25,000

15,000

Dividend payable

20,000

12,000

Provisions

12,500

9,300

Current tax liability

43,000

34,000

Deferred tax liability

11,800

5,000

Accumulated depreciation-vehicles

16,400

60,000

Accumulated depreciation-equipment

34,500

8%Debentures (matures 30 June 2021)

25,000

Cash

2,500

1,250

Receivables

27,000

13,000

Inventories

39,700

24,500

Other current assets

15,200

8,200

Deferred tax assets

7,500

3,500

Vehicles

88,000

158,000

Equipment

42,000

Land

140,000

180,000

Financial assets

68,000

14,800

Goodwill

28,000

15,000

Shares in Sing Song Ltd

250,000

Debentures in Ping Pong Ltd

25,000

1,005,900

798,300

Additional information:

On 1 January 2018, Ping Pong Ltd sold an item of equipment toSing Song Ltd for $18,000. The equipment had a carrying amount atthe date of sale of $21,000. Both companies depreciate equipment at20% on a straight line basis.
On 1 May 2017, Sing Song Ltd sold a machine to Ping Pong Ltd for$7,800. The machine had a carrying amount of $7,000 at the date ofsale. Ping Pong Ltd recorded the machine as inventories. Theinventories item was sold to an external party in November 2017 for$8,200.
All interests on the 8% debentures has been paid and brought toaccount in the records of both companies.
During the 2017-2018 financial year, Ping Pong Ltd sold inventoriesto Sing Song Ltd for $75,000. The cost of these inventories to SingSong Ltd was $70,000. Of these inventories, 25% is still on hand at30 June 2018.
The transfer to the general reserve recorded by Sing Song Ltd inthe current year was from retained earnings recorded at 1 July2015.
The tax rate is 30%.

Required:

Prepare an acquisition analysis.
Prepare the consolidation worksheet entries necessary to preparethe consolidated financial statements for the year ending 30 June2018 for the group comprising Ping Pong Ltd and Sing Song Ltd.

Note: you are not required to prepare the consolidationworksheet and the consolidated financial statements.

marty Ltd was as follows.

	$
Share capital	100,000
Retained earnings	175,000
Total	275,000

All the assets and liabilities of Smarty Ltd were recorded atamounts equal to their fair values at the acquisition date, exceptfor some assets detailed below.

	Remaining useful life	Cost	Carrying amount	Fair value
		$	$	$
Plant	5 years	180,000	90,000	120,000
Computer equipment	5 years	90,000	40,000	60,000

Required:

Prepare the acquisition analysis at 1 July 2017.

Prepare the consolidation worksheet entries for Panda Ltdâsgroup at 1 July 2017.

Prepare the consolidation worksheet entries for Panda Ltdâsgroup at 30 June 2018.

Question 1	Max. marks allocated
Acquisition analysis	3
Consolidation entries at 1 July 2017	6
Consolidation entries at 30 June 2018	10
Presentation	1
Total	20

Question 2 [35 marks]

Topic 2: Consolidation: Intra-grouptransactions

	Carrying amount	Fair value
	$	$
Land	100,000	130,000
Inventories	78,500	86,100
Machinery (cost $86,000)	52,000	56,000
Vehicles (cost $58,000)	47,000	53,000

In June 2017, Sing Song Ltd paid a share dividend worth $20,000from the general reserve on hand at 1 July 2015.

The trial balances of both companies at 30 June 2018 showed thefollowing balances:

	Ping Pong Ltd		Sing Song Ltd
	Dr ($)	Cr ($)	Dr ($)	Cr ($)
Sales revenue		450,000		320,000
Dividend revenue		17,000		-
Other income		11,400		17,000
Proceeds on sale of equipment		18,000		-
Proceeds on sale of machinery		-		38,000
Cost of sales	210,000		192,550
Income tax expense	30,000		32,000
Depreciation and other expenses	39,000		36,000
Carrying amount of equipment sold	21,000		-
Carrying amount of machinery sold	-		30,500
Dividend paid	10,000		5,000
Dividend declared	20,000		12,000
Transfer to general reserve	10,000		5,000
Share capital		200,000		140,000
General reserve		35,000		10,000
Retained earnings (1 July 2017)		51,300		67,500
Accounts payable		69,500		36,000
Loan payable (due 30 June 2022)		25,000		15,000
Dividend payable		20,000		12,000
Provisions		12,500		9,300
Current tax liability		43,000		34,000
Deferred tax liability		11,800		5,000
Accumulated depreciation-vehicles		16,400		60,000
Accumulated depreciation-equipment		-		34,500
8%Debentures (matures 30 June 2021)		25,000		-
Cash	2,500		1,250
Receivables	27,000		13,000
Inventories	39,700		24,500
Other current assets	15,200		8,200
Deferred tax assets	7,500		3,500
Vehicles	88,000		158,000
Equipment	-		42,000
Land	140,000		180,000
Financial assets	68,000		14,800
Goodwill	28,000		15,000
Shares in Sing Song Ltd	250,000		-
Debentures in Ping Pong Ltd	-		25,000
	1,005,900	1,005,900	798,300	798,300

Additional information:

On 1 May 2017, Sing Song Ltd sold a machine to Ping Pong Ltd for$7,800. The machine had a carrying amount of $7,000 at the date ofsale. Ping Pong Ltd recorded the machine as inventories. Theinventories item was sold to an external party in November 2017 for$8,200.

All interests on the 8% debentures has been paid and brought toaccount in the records of both companies.

During the 2017-2018 financial year, Ping Pong Ltd soldinventories to Sing Song Ltd for $75,000. The cost of theseinventories to Sing Song Ltd was $70,000. Of these inventories, 25%is still on hand at 30 June 2018.

The transfer to the general reserve recorded by Sing Song Ltd inthe current year was from retained earnings recorded at 1 July2015.

The tax rate is 30%.

Required:

Prepare an acquisition analysis.

Prepare the consolidation worksheet entries necessary to preparethe consolidated financial statements for the year ending 30 June2018 for the group comprising Ping Pong Ltd and Sing Song Ltd.

Note: you are not required to prepare the consolidationworksheet and the consolidated financial statements.

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ACCT 001 Lecture Notes - Lecture 13: Subledger, Debits And Credits, Accounts Receivable

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