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Acquisition of Saban Ltd;On 1stJanuary 2010, Habiki Ltd acquired 90% of the share capital (ex div) of Saban Ltd for...




Acquisition of Saban Ltd;On 1 st January 2010, Habiki Ltd acquired 90% of the share capital (ex div) of Saban Ltd for $14,500,000. At this date, the accounts of Saban Ltd included the following balances;Share capital (9,000,000 shares) $9,000,000;General reserve 2,100,000;Retained profits 1,050,000;Dividends payable 900,000;All of the identifiable net assets of Saban Ltd were recorded at fair value except for Patents which had a fair value of $1,180,000 above the carrying amount. Adjustments for the differences are made on consolidation and tax-effect entries are needed.On the 15 June 2011, Saban Ltd paid a cash dividend of $450,000 (appropriated from pre-acquisition profits). This amount was recognised as revenue by Habiki Ltd. The Financial Controller of Habiki Ltd felt that the dividend had impaired the value of the company?s investment in Saban Ltd and subsequently records an impairment of the Investment in SabanAccount for the applicable amounts received as a dividend.;(a) On 1 st October 2014, Saban sold inventory to Habiki Ltd for $1,350,000, at a mark-up of 20%. At 31stDecember 2014, $778,000 of this inventory was still on hand;(b) On 28 th November 2013, Habiki Ltd sold some inventory to Saban Ltd for $980,000, at a profit before tax of $530,000. This was still on hand in Saban Ltd at 31 st December 2013, but was all sold by 31 st December 2014.;(c) On 1 st July 2014, Saban Ltd sold an item of equipment to HabikiLtd for $2,680,000 at a before tax loss of $985,000. The equipment has a useful life of 5 years and is depreciated using the straight-line method by both companies.;(d) During the year Habiki Ltd paid $165,000 of Staff Training Fees to Saban Ltd. This amount is disclosed under General Administrative Expenses by Habiki Ltd.;(e) Habiki Ltd extended a loan of $700,000 to Saban Ltd. This loan was issued on the 1 st March 2012 payable over 10 years, with an interest rate on the loan of 5.5% pa. Interest is paid on the 1 st April and 1 st October every year.;(f) A goodwill impairment test in December 2014 revealed the need to impair goodwill by $221,600. No other impairment of goodwill has been recorded. For consolidation purposes the partial goodwill method is used.;(g) All dividends are recognised before receipt of cash.;(h) The corporate income tax rate is 30% and the companies in the group have financial years from 1 st January to 31 st December.;REQUIRED;Consolidate Habiki Ltd and Saban Ltd;(a) Prepare the consolidation journal entries, with narrations, and the consolidated worksheet (using Excel) to consolidate HABIKI Ltd and SABAN Ltd for the year ended 31 st December 2014.;(b) Produce the completed Consolidated Financial Reports (Statement of Comprehensive Income and Statement of Financial Position) for the year ended 31stDecember 2014. You are advised to comply with AASB standards and the requirements in the Australian Corporations Legislation when determining the structure and presentation requirements for the financial reports in preparing the financial statements for this assignment.;Accounts;Habiki Ltd;Saban Ltd;31/12/2014;31/12/2014;Balance Sheet Accounts;Cash and Cash equivalents;$4,628,890;$2,545,890;Accounts Receivable;$6,199,250;$3,409,588;Allowance for Doubtful Debts;$491,000;$270,050;Accruals & Other Receivables;$259,934;$142,964;Short term Cash Investments;$0;$0;Inventory;$999,034;$549,469;Goodwill;$1,222,893;$672,591;Prepayments;$2,270,953;$1,249,024;Loans Receivable;$700,000;$385,000;Motor Vehicles;$2,220,075;$1,221,041;Accumulated Depreciation - Vehicles;$333,011;$183,156;Marketable Securities;$370,013;$203,507;Investment in Saban Ltd;$14,500,000;$0;Accumulated Impairment of Investment;$405,000;$0;Dividend and Interest Receivable;$955,866;$525,726;Trademarks & Patents (net of amortisation);$17,584,782;$9,671,630;Debentures in Westfield Ltd;$82,940;$0;Deferred Tax Asset;$2,524,226;$1,388,324;Property, Plant and Equipment;$13,875,469;$7,631,508;Accumulated Depreciation - PPE;$4,625,156;$2,543,836;Land;$8,247,972;$4,536,383;TOTAL;$70,788,130;$31,135,603;Deferred Tax Liability;$1,034,924;$569,208;Tax Payable;$1,051,309;$578,220;Dividends Payable (Ordinary Shares);$1,739,059;$956,482;Accounts Payable;$7,510,999;$3,772,800;Other Liabilities & Provisions;$4,739,506;$2,561,111;Loans;$0;$700,000;Debentures (3.5%);$2,368,080;$1,302,444;General Reserve;$5,979,988;$3,703,718;Other Capital Reserve;$22,868,796;$4,675,588;Issued Share Capital ($1 ORD A shares);$17,374,500;$9,000,000;Issued Share Capital ($1 Preference shares);$550,000;$302,500;Retained Profits (c/b);$5,570,969;$3,013,532;Total Liabilities & Equity;$70,788,130;$31,135,603;Profit and Loss Accounts;Habiki Ltd;Saban Ltd;31/12/2014;31/12/2014;Sales Revenue;$16,934,239;$9,313,831;Stack at Start;$555,019;$305,260;Purchases;$7,250,100;$3,987,555;Stock at end;$999,034;$549,469;Cost of Goods Sold;$6,806,085;$3,743,346;Gross Profit;$10,128,154;$5,570,485;Less Expenses;Expenses from Operations;$2,655,457;$1,460,501;General Administration Expenses;$808,476;$444,662;Depreciation and Amortisation Expenses;$2,778,794;$1,528,337;Impairment Expenses;$415,000;$87,000;Finance Costs;$103,604;$56,982;Total Expenses;$6,761,331;$3,577,482;Add Other Income


Paper#77733 | Written in 18-Jul-2015

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