Question

Tim Ltd acquired all the issued capital of Tam Ltd on 1 July 2012 for $3,020,000. At that date the shareholders’ equity of Tam Ltd was:

	$
Share Capital	2,200,000
Retained Earnings	640,000

Additional information for the year ended 30 June 2014:

(1) Intercompany sales:

(a)    Tim Ltd to Tam Ltd              $42,000

(b)    Tam Ltd to Tim Ltd              $36,000

(2) Unrealised profits in closing inventory as at 30 June 2014 is $2,400 for goods sold by Tam Ltd to Tim Ltd and $4,800 for goods sold by Tim Ltd to Tam Ltd.

(3) Unrealised profit in opening inventory for goods sold by Tim Ltd to Tam Ltd as at 1 July 2013 is $2,800 and for goods sold by Tam Ltd to Tim Ltd is $4,200.

(4) Tim Ltd employees provide administration support to Tam Ltd. For these services, Tam Ltd pays an annual fee of $20,000 per annum.

(5) The final dividend of $33,000 declared as at 30 June 2013, was paid by Tam

Ltd in October 2013. An interim dividend was paid in January $28,000. A

final dividend was declared at 30 June, 2014 $40,000.

(6) On 30 June 2014, Tim Ltd purchased a motor vehicle from Tam Ltd for

$30,000. Tam Ltd made profit on this sale of $7,000.

(7) Tam Ltd raised funds from Tim Ltd by issuing $200,000, 8% Debentures on

1 July 2013. The annual interest charge was paid by Tam Ltd 30 June 2014.

(8) The directors review the balance of goodwill each year. They agree that:

(a)   For the year ended 30 June 2013, goodwill was impaired by $10,000.

(b) For the year ended 30 June 2014, goodwill is to be impaired by

$40,000. Trial balance of Tim Ltd and Tam Ltd is attached for your information

Required:

Prepare the appropriate consolidated journal entries for 30 June 2014 to record the following transactions in the worksheet provided:

Trial Balance for Tim Ltd & Tam Ltd: 30 June 2014

	Tim Ltd	Tam Ltd	Eliminations		Consolidation
Sales	2,970,000	1,650,000
Less: Cost of Sales
Inventory 01/07/2013	240,000	104,000
Purchases	1,250,000	626,000
	1,490,000	730,000
Inventory 30/06/2014	230,000	98,000
Cost of Goods Sold	1,260,000	632,000
Gross Profit	1,710,000	1,018,000
Administration support fees	20,000	0
Gain on Sale of Plant	0	7,000
Dividends Received	61,000	0
Interest Received on Debentures	16,000	0
	1,807,000	1,025,000
Less: Expenses - Selling Exp.	160,000	71,000
- Admin Exp. - Financial Exp.	583,000 104,000 847,000	628,000 16,000 715,000
Operating Profit before Tax	960,000	310,000
Less: Tax expense	288,000	93,000
Profit after Tax	672,000	217,000
Retained Earnings 01/07/2013	1,176,000	843,000
Available for Appropriation	1,848,000	1,060,000
Appropriations
Interim dividend paid	160,000	28,000
Final dividend declared	280,000	40,000
Total Appropriations	440,000	68,000
Retained Earnings 30/06/2014	1,408,000	992,000
Share Capital	4,000,000	2,200,000
8% Debentures	0	200,000
Accounts Payable	144,000	72,000
Final Dividends Payable	280,000	40,000
Taxation Payable	188,000	50,000
	6,020,000	3,554,000
Property, Plant & Equip (net)	1,464,000	1,800,000
Shares in Tam Ltd	3,020,000	0
8% Debentures	200,000	0
Other Non-Current Assets	650,000	1,300,000
Inventory	230,000	98,000
Other Current Assets	456,000	356,000
Goodwill on Consolidation
	6,020,000	3,554,000

Use the following format:

Tim & Tam Ltd                                                                  

General Journal

Consolidated worksheet for Tim Ltd & Tam Ltd as at 30 June 2014

	Tim Ltd	Tam Ltd	Eliminations		Consolidation
Sales	2,970,000	1,650,000
Less: Cost of Sales
Inventory 01/07/2013	240,000	104,000
Purchases	1,250,000	626,000
	1,490,000	730,000
Inventory 30/06/2014	230,000	98,000
Cost of Goods Sold	1,260,000	632,000
Gross Profit	1,710,000	1,018,000
Administration support fees	20,000	0
Gain on Sale of Plant	0	7,000
Dividends Received	61,000	0
Interest Received from Tam ltd	16,000	0
	1,807,000	1,025,000
Less: Expenses - Selling Exp.	160,000	71,000
- Admin Exp.	583,000	628,000
- Financial Exp.	104,000	16,000
	847,000	715,000
Operating Profit before Tax	960,000	310,000
Less: Tax expense	288,000	93,000
Profit after Tax	672,000	217,000
Retained Earnings 01/07/2013	1,176,000	843,000
Available for Appropriation	1,848,000	1,060,000
Appropriations
Interim Dividend paid	160,000	28,000
Final Dividend declared	280,000	40,000
Total Appropriations	440,000	68,000
Retained Earnings 30/06/2014	1,408,000	992,000
Share Capital	4,000,000	2,200,000
8% Debentures	0	200,000
Accounts Payable	144,000	72,000
Final Dividends Payable	280,000	40,000
Taxation Payable	188,000	50,000
	6,020,000	3,554,000
Property, Plant & Equip (net)	1,464,000	1,800,000
Shares in Tam Ltd	3,020,000	0
8% Debentures in Tam	200,000	0
Other Non-Current Assets	650,000	1,300,000
Inventory	230,000	98,000
Other Current Assets	456,000	356,000
Goodwill on Consolidation
	6,020,000	3,554,000

Answer 1

Tim & Tam Ltd

General Journal

30, June, 2014	consolidated Profit and Loss	7000
	Inventory (opening)		7000
	(Common Profits Elimineted)
	consolidated Profit and Loss	7200
	Inventory (Closing)		7200
	(Common Profits Elimineted)
	consolidated Profit and Loss	20000
	Administration Support Fees		20000
	(Common Profits Eliminited)
	consolidated Profit and Loss	7000
	Property, Plant & Equipment		7000
	(Common Profits Eliminited)

	8% Debentures (Tam Ltd)	200000
	8% Debentures (TIMLtd.)		200000
	(Common Investment and Liabilities Elimineted)
	Final Dividend Payble (TAM Ltd.)	40000
	other Current Assets (TIM Ltd.)		40000