Company Accounting Homework: Consolidation Entries and Worksheets

This document provides a comprehensive solution to a company accounting homework assignment, focusing on the consolidation of financial statements. It begins with consolidation journal entries, detailing the debits and credits required to combine the financial data of Starr Ltd and Lennon Ltd. The solution then presents consolidation worksheets for both the income statement and balance sheet, outlining the process of combining and eliminating intra-group transactions. The income statement worksheet covers sales revenue, cost of sales, and various expenses, culminating in the calculation of profit before tax and net profit. The balance sheet worksheet details the consolidation of equity, liabilities, and assets, including financial assets, plant, inventory, and deferred tax items. The assignment demonstrates the step-by-step process of preparing consolidated financial statements, which is crucial for understanding the financial position and performance of a group of companies.

Company Accounting

TABLE OF CONTENTS
Consolidation journal entries.......................................................................................................3
Consolidation worksheets............................................................................................................3

Consolidation journal entries
S. No. Particulars Debit (in $) Credit (in $)
1. Investment in
subsidiary a/c dr.
To cash a/c
80000
80000
2. Sales revenue a/c Dr
To P&L a/c
60000
60000
3. Retained earnings a/c
Dr
G/R a/c dr.
To shareholders equity
9600
6600
16200
Consolidation worksheets
Income statement
Particulars
Starr
Ltd
Lennon
Ltd
Com
bine
Elimi
nate
Intra-group
transactions
Consolidated
income statement
Sales
revenue
$316,
000 220000
$536,
000 60000 $476,000
Other
revenue: $0 $0
Debenture
interest 5,000
$5,00
0 5000 $0
Management
and
consulting
fees 5,000
$5,00
0 $5,000
Dividend
from Lennon
Ltd
12,00
0
$12,0
00 $12,000
Total
revenues
338,0
00 220,000
$558,
000 $493,000
Cost of sales
130,0
00 85000
$215,
000 $215,000
Manufacturin
g expenses
90,00
0 60000
$150,
000 5000 $145,000
Depreciation
on plant
15,00
0 15000
$30,0
00 $30,000
Administrati 15,00 8000 $23,0 $23,000

ve 0 00
Financial
11,00
0 5000
$16,0
00 $16,000
Other
expenses
14,00
0 12000
$26,0
00 $26,000
Total
expenses
275,0
00 185,000
$460,
000 $455,000
Profit before
tax
63,00
0 35,000
$98,0
00 $38,000
Income tax
expenses
25,00
0 17000
$42,0
00 $11,400
Profit
38,00
0 18,000
$56,0
00 $26,600
Balance sheet
Particulars
Starr
Ltd
Lenno
n Ltd
Com
bine
Elimi
nate
Intra-group
transactions
Starr Ltd
consolidated balance
sheet
Retained
earnings
(30/06/16)
65,00
0 48,000
113,0
00 9600 103,400
General
reserve
50,00
0 10,000
60,00
0 6600 53,400
Other
components
of equity
13,00
0 10,000
23,00
0 2000 21,000
Share
capital
300,0
00
100,00
0
400,0
00
2000
0 380,000
Debentures
200,0
00
100,00
0
300,0
00
100,0
00 200,000
Current tax
liability
25,00
0 17,000
42,00
0 42,000
Dividend
payable
10,00
0 5,000
15,00
0 15,000
Deferred tax
liability - 7,000 7,000 7,000
Othe
r
liabil
ities
90,00
0 12,000
102,0
00 102000
$
753,0
00
309,00
0 1,020,500

Financial
assets
50,00
0 60,000
110,0
00 110,000
Debentures
in Lennon
Ltd
100,0
00 -
100,0
00 100,000
Shares in
Lennon Ltd
131,6
00 -
131,6
00 131,600
Plant (cost)
120,0
00
102,00
0
222,0
00 15000 207,000
Accumulate
d
depreciation
– plant
-
65,00
0
-
55,000
-
120,0
00 -120,000
Other
depreciable
assets
76,00
0 55,000
131,0
00 131,000
Accumulate
d
depreciation
-
40,00
0
-
25,000
-
65,00
0 -65,000
Inventory
90,00
0 85,000
175,0
00 22500 152,500
Deferred tax
asset
85,40
0 30,000
115,4
00 115,400
Land
201,0
00 57,000
258,0
00 258,000
Dividen
d
receiva
ble 4,000 -
$
753,0
00
309,00
0 1,020,500