| Category | Assignment | Subject | Finance |
|---|---|---|---|
| University | Singapore University of Social Scienece | Module Title | BUS356 Contemporary Financial Accounting Group Based |
On 1 July 2019, Diana Ltd acquired 100% of the issued shares of Charles Ltd for $320,000. At the date of acquisition, the shareholders’ equity of Charles Ltd consisted of:
| Share capital | $200,000 |
| General reserve | $50,000 |
| Retained earnings | $30,000 |
| Total | $280,000 |
At 30 June 2023, the accounts of the two companies are presented below.
Income Statement
| Diana Ltd | Charles Ltd | |
|---|---|---|
| Sales | $360,000 | $195,000 |
| Cost of goods sold | ($230,000) | ($120,000) |
| Gross profit | $130,000 | $75,000 |
| Dividends revenue | $14,000 | – |
| Interest revenue | $3,000 | $5,000 |
| Total revenue | $147,000 | $80,000 |
| Less Expenses | ||
| Depreciation | $11,000 | $7,000 |
| Financial expenses | $9,000 | $9,000 |
| Selling expenses | $8,000 | $10,000 |
| Profit before tax | $119,000 | $54,000 |
| Tax expense | $48,000 | $20,000 |
| Profit after tax | $71,000 | $34,000 |
| Retained earnings 1 July 2022 | $60,000 | $10,000 |
| Total retained earnings | $131,000 | $44,000 |
| Interim dividend paid | $10,000 | $6,000 |
| Final dividend proposed | $30,000 | $10,000 |
| Retained earnings 30 June 2023 | $91,000 | $28,000 |
Statement of Financial Position
| Diana Ltd | Charles Ltd | |
|---|---|---|
| Shareholders’ equity | ||
| Retained earnings | $91,000 | $28,000 |
| Share capital | $350,000 | $200,000 |
| General reserve | $30,000 | $50,000 |
| Liabilities | ||
| Accounts payable | $45,000 | $5,000 |
| Dividend payable | $30,000 | $10,000 |
| Accrued interest – Diana Ltd | – | $1,000 |
| Loan – Diana Ltd | – | $40,000 |
| Other liabilities | $40,000 | $10,000 |
| Total liabilities and equity | $586,000 | $344,000 |
| Assets | ||
| Cash at bank | $2,000 | $1,000 |
| Deposits | $65,000 | – |
| Inventory | $40,000 | $30,000 |
| Interest receivable | $1,000 | – |
| Loan – Charles Ltd | $40,000 | – |
| Investment in Charles Ltd | $320,000 | – |
| Plant and equipment | $110,000 | $180,000 |
| Accumulated depreciation | ($45,000) | ($40,000) |
| Land and buildings | $120,000 | $102,000 |
| Accumulated depreciation | ($5,000) | ($14,000) |
| Other assets | $3,000 | $20,000 |
| Total assets | $586,000 | $344,000 |
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