Question 1

Financial statements of Equuleus Ltd and its subsidiary Fornax Ltd at 31 Dec 2014:
Equuleus Ltd Fornax Ltd
Profit before tax $ 3200 $ 1800
Income tax expense (1300) (240)
Profit for the year 1900 1560
Other comprehensive income:
Gain/loss on FA fair value change (500) 200
Total comprehensive income 1400 1360

Profit for the year 1900 1560

Retained earnings (1/1/2014) 1500 2100
3400 3660
Dividend (500) (0)
Retained earnings (31/12/2014) 2900 3660

Share capital 25000 10000

General reserve 8000 3000

FA fair value change reserve (1/1/2014) 1500 300

Change during the year (simultaneously as OCI) (500) 200
FA fair value change reserve (31/12/2014) 1000 500

Liabilities (include DTL net of DTA) 5000 1300

Total equity and liabilities $ 41900 $ 18460

Land $ 8600 $ 5100

Plant 17000 8000
Accumulated depreciation (5000) (1000)
Financial assets 3000 2000
Inventory 3000 4000
Cash 300 360
Shares in Fornax Ltd 15000 -
Total Assets $ 41900 $ 18460

Equuleus Ltd had acquired all the share capital of Fornax Ltd on 1 Jan 2013 for $15000 when the equity of
Fornax Ltd consisted of:
Share capital - 10 000 shares $10 000
General reserve 2 000
Retained earnings 1 500
At the acquisition date, Fornax’s assets and liabilities were recorded as fair value except for the following:
Carrying amount Fair value
Land $ 4000 6000
Plant (cost $6000) 5500 6500
Inventory 3000 4000
The plant had a further 5-year life. The inventory was sold by 31 Dec 2013. All valuation adjustments to
non-current assets are made on consolidation. The land was sold in May 2014 for $6000. Tax rate is 30%.
Required
Prepare the consolidated financial statements for the year ended 31 Dec 2014. Include consolidation
adjustment journal entries and a consolidation worksheet.
Question 2
Auriga Ltd acquired all the shares of Perseus Ltd on 1 Jan 2013 when its equity consisted of:
Share capital $100 000
Retained earnings 35 000
At 1 Jan 2013, all the identifiable assets and liabilities of Perseus Ltd were recorded as fair value except for:
Carrying amount Fair Value
Inventory $ 18 000 $ 22 000
Land 120 000 130 000
Plant (cost $120 000) 95 000 98 000
The inventory was all sold by 31 Dec 2013. The plant had a further 5-year life but was sold on 1 July 2015
for $50 000. The land was sold in March 2013 for $150000.
At 1 Jan 2013, Perseus Ltd had guaranteed a loan taken out by Swede Ltd. Persues Ltd had not recognised a
liability in relation to the guarantee. However as Swede Ltd was not performing well, Auriga Ltd valued a
guarantee liability at $5000. In June 2015, Swede Ltd repaid the loan. Perseus Ltd had also invented a
special tool and patented the process. No asset was recorded by Perseus Ltd, but Auriga Ltd valued the
patent at $6000, with an expected useful life of 6 years. Tax rate is 30%.
Financial information for the companies for the year ended 31 Dec 2015 is as follows:
Auriga Ltd Perseus Ltd
Profit before tax $ 50 000 $ 15 000
Income tax expense (20 000) (6 000)
Profit for the year 30 000 9 000
Other comprehensive income:
Gains on plant revaluation 6 000 0
Loss on FA fair value change (4 000) (10 000)
Total comprehensive income for the year $ 32 000 $ (1 000)

Profit $ 30 000 $ 9 000

Retained earnings (1/1/15) 37 000 45 000
67 000 54 000
Dividend (20 000) -
Retained earnings (31/12/15) 47 000 54 000

Share capital 150 000 100 000

General reserve 12 000 -

Asset revaluation reserve (1/1/15) 14 000 -

Gains on plant revaluation 6,000 -
Asset revaluation reserve (31/12/15) 20 000 -

FA fair value change reserve (1/1/15) 14 000 14 000

Losses on FA fair value change (4 000) (10,000)
FA fair value change reserve (31/12/15) 10 000 4 000

Total equity 239 000 158 000

Payables 19 000 8 000

Loan 25 000 -
Total Liabilities 44 000 8 000

Total equity and liabilities $ 283 000 $ 166 000

 Cash 5 000 14 000
Financial assets 10 000 5 000
Inventory 30 000 21 000
Plant and equipment 140 000 163 000
Accumulated depreciation (62 000) (37 000)
Shares in Perseus Ltd 160 000 -
Total assets $ 283 000 $ 166 000

Required
Prepare the consolidated financial statements for Auriga Ltd as at 31 Dec 2015. Include consolidation
adjustment journal entries and a consolidation worksheet.