BUS356 Assignment Brief
Assignment Type – Group Assignment
The assignment must be submitted online through the LMS under the Group Assignment section by the deadline. Ensure that only one member of the group submits the final assignment on behalf of the group. The group assignment is to be done in pairs of TWO or Three students.
Late submissions will not be accepted, and no extensions will be granted. Students are reminded that assignments are to be their own work. Any evidence of collusion or plagiarism between groups will be treated as academic misconduct, and appropriate action will be taken.
Please find the instructions for the individual assignment over the page.
You are required to submit your assignment as a Word file using size 12, Times New Roman font.
There is a word limit on the written answers to questions 4 & 5 of the assignment; your answers for these questions are not to exceed 750 words for both answers. It is recommended that you reference your answers where appropriate.
Generative AI
While students are permitted to used generative AI to enhance their understanding of contemporary financial accounting concepts and principles, generative AI must be properly referenced if it is used in this assessment. If evidence of the use of generative AI is found in this assignment without proper referring, academic misconduct proceedings will be initiated.
Group Assignment Question
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 |
| $ | 280 000 |
At 30 June 2023, the accounts of the two companies are presented below.
| 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 |
| 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 |
| 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 |
| 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 |
| 586 000 | 344 000 |
Additional information
- The identifiable net assets of Charles Ltd were recorded at fair value at the date of acquisition.
- In applying the impairment test for goodwill in the current year, the directors have determined that a write-down of $10 000 is required for consolidation purposes. The cumulative goodwill impairment write-downs for prior years amounted to $15 000.
- An item of plant and equipment owned by Charles (cost $30 000 and accumulated depreciation of $15 000) was sold to Diana Ltd for $13 000 on 1 July 2020. Charles depreciated the asset at 10% per annum straight-line on original cost (assuming a 10-year economic life). Diana, assuming a further economic life for the plant and equipment of
- five years from its date of acquisition, has applied a depreciation rate of 20% straight-line from the date of transfer of the asset.
- The opening inventory of Charles Ltd includes unrealised profit of $2 000 on inventory transferred from Diana Ltd during the prior financial year. All of this inventory was sold by Charles Ltd to parties external to the group during the year ended 30 June 2023.
- During the current financial year, Charles Ltd purchased inventory from Diana Ltd for $30 000. The inventory had previously cost Diana Ltd $24 000. One-third of this inventory was sold to outsiders by Charles during the year.
- Charles Ltd borrowed $40 000 from Diana Ltd during the financial year. Charles paid $2 000 interest on this loan during the year. In addition, a further $1 000 in interest has been recognised as an accrued expense in Charles Ltd’s accounts and as interest receivable in Diana Ltd’s accounts. Interest expense is included in Charles Ltd’s accounts under the financial expenses heading.
- On 15 July 2022, Charles Ltd paid a final dividend of $8 000 to Diana Ltd from profits for the prior financial year.
- Charles also paid an interim dividend of $6 000 to Diana Ltd on 1 February 2023. In addition, Charles Ltd has provided for a final dividend amounting to $10 000. Diana Ltd has not recognised this dividend as a receivable prior to receipt.
- The tax rate is 30%.
Required
- Prepare an acquisition analysis.
- Prepare the consolidation journal entries necessary to prepare consolidated accounts for the year ending 30 June 2023 for the group comprising Diana Ltd and Charles Ltd.
- Prepare the consolidation worksheet for the preparation of the consolidated financial statements for the period ended 30 June 2023.
- Why is it important to identify intragroup transactions as current or previous period transactions?
- In what circumstances is a tax-effect adjustment required when making an adjustment for an intragroup transaction? Provide two examples of intragroup transactions that would require a tax-effect adjustment and one example of an intragroup transaction that would not require a tax-effect adjustment.
BUS356 Group Assignment Marking Rubric
| Question | Assessment Criteria |
| 1. Acquisition Analysis (8 marks) | Accuracy and completeness of the acquisition analysis |
| 2. Consolidation Journal Entries (34 marks) | Correctness and appropriateness of all required journal entries |
| 3. Consolidation Worksheet (43 marks) | Accuracy and completeness of worksheet preparation |
| 4. Importance of Intragroup Transaction Timing (5 marks) | Clear explanation of the importance of identifying intragroup transactions as current or prior periods. |
| 5. Tax-Effect Adjustments for Intragroup Transactions (10 marks) | Clear explanation of circumstances requiring tax-effect adjustments, including two relevant examples that require adjustment and one that does not. |
| ………/100 | |
| Mark | ………/20 |
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