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Required: Prepare the consolidated financial statements of Griffin Ltd at 30 June 2019. Griffin Ltd is...

Required: Prepare the consolidated financial statements of Griffin Ltd at 30 June 2019.

Griffin Ltd is a major Australian company operating in the manufacture of women’s clothing. One of its major competitors is Frank Ltd whose business was established by a French family over 30 years ago. It has won numerous awards for its designs and has established a number of brands that have been successful, especially with the teenage market.

In order to expand its business as well as to reduce the number of players in the market, on 1 July 2016 Griffin Ltd acquired all the issued shares (less div.) of Frank Ltd for $330 000. At this date the equity of

Frank Ltd was as follows:

Share capital

$200 000

General reserve

20 000

Retained earnings

50 000

All the identifiable assets and liabilities of Frank Ltd were recorded at amounts equal to their fair values except for the following:

Carrying amount

Fair value

Plant (cost $220 000)

$180 000

$186 000

Land

190 000

210 000

Inventories

20 000

28 000

The plant’s expected remaining useful life was 5 years with benefits being expected evenly over that period. The plant was sold on 1 January 2019 for $187 000. The land was sold in February 2018 for $250 000. Of the inventory, 90% was sold by 30 June 2017 and the rest by 30 June 2018.

At 1 July 2016, Frank Ltd had recorded a dividend payable of $10 000 that was paid in September 2016. Frank Ltd also had some unrecorded assets, in particular the brands relating to the successful clothing sold in the teenage market. Griffin Ltd valued these brands at $12 000 and assessed them to have an indefinite life. In its financial statements at 30 June 2016, Frank Ltd raised a contingent liability relating to a guarantee it had made to one of its related companies. Griffin Ltd assessed the fair value of the guarantee payable at $10 000. In August 2018, Frank Ltd was required to pay $2500 in relation to the guarantee.

All transfers to the general reserve made by Frank Ltd have been from retained earnings earned prior to 1 July 2016. The tax rate is 30%.

The financial information provided by the two companies at 30 June 2019 is as follows:

Griffin Ltd

Frank Ltd

Revenues

$ 190 000

$ 110 000

Expenses

80 000

76 000

110 000

34 000

Gains on sale of non-current assets

5 000

4 000

Profit before tax

115 000

38 000

Income tax expense

(40 000)

(6 000)

Profit for the year

75 000

32 000

Other comprehensive Income:

Gains on revaluation of plant

12 000

0

Comprehensive income for the year

$ 87 000

$ 32 000

Profit for the year

$ 75 000

$ 32 000

Retained earnings (1 July 2018)

80 000

88 000

155 000

120 000

Dividend paid

(34 000)

0

Transfer to general reserve

0

(15 000)

(34 000)

(15 000)

Retained earnings (30 Juno 2010)

$ 121 000

$ 105 000

Share capital

$ 280 000

$ 200 000

General reserve

20 000

48 000

Asset revaluation surplus

24 000

0

Retained earnings

121 000

105 000

Total equity

445 000

353 000

Provisions

$ 15 000

$ 12 000

Payables

40 000

8 000

Total liabilities

55 000

20 000

Total equity and liabilities

$ 500 000

$ 373 000

Cash

$ 12 000

$ 30 000

Accounts receivable

28 000

12 000

Inventories

30 000

51 000

Plant

230 000

320 000

Accumulated.depreciation — Plant

(120 000)

(40 000)

Shares In Frank Ltd

320 000

0

Total assets

$ 500 000

$ 373 000

0 0
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