Consolidated Worksheet: Sisters Ltd and Brothers Ltd - Year Ended 2017

The assignment presents a consolidated worksheet for Sisters Ltd and its controlled entity, Brothers Ltd, for the year ended June 30, 2017. The worksheet includes the income statement, statement of financial position, and supporting schedules. It details the process of consolidating the financial statements, including eliminations of intercompany transactions, such as the sale of a vehicle, and the recognition of goodwill. The document provides calculations for goodwill on acquisition, consolidation worksheet entries, and adjustments for unrealized profits, depreciation, and tax impacts. It also addresses the impairment of goodwill. The worksheet demonstrates the steps necessary to prepare consolidated financial statements, ensuring that the financial performance and position of the group are accurately reflected, and that the financial statements are compliant with accounting standards. The solution provides a comprehensive overview of the consolidation process, including all necessary adjustments and eliminations.

Consolidated worksheet of Sisters Ltd and its controlled entity (Brothers Ltd) for the year ended 30 June 2017
($ '000)
Sisters
Ltd
Brothers
Ltd
Eliminations Consolidate
dDebit Credit
Reconciliation of opening and
closing retained earnings
Sales revenue 30,000 2,200 32,200
less Cost of goods sold (14,000) (550) (14,550)
Gross profit 16,000 1,650 17,650
Other income
Gain on sale of fixed asset 6,000 100 (b) 100 6,000
Expenses
Depreciation (2,000) (400) (d) 20 (2,380)
Other expenses (3,800) (200) (f) 10 (4,010)
Profit before tax 16,200 1,150 17,260
Tax expense (30 % Tax Rate) (4,860) (345) (e) 6 (c) 30 (5,181)
Profit after tax 11,340 805 12,079
Retained earnings-1 July 2016 6,000 150 (a) 150 6,000
Retained earnings-30 June 2017 17,340 955 18,079
Statement of financial position
Shareholders' equity
Retained earnings - 30 June 2017 17,340 955 18,079
Share capital 10,000 600 (a) 600 10,000
Reserves - 120 (a) 120 -
Current liabilities
Tax payable 5,600 20 5,620
Non-current liabilities
Loans 4,000 750 4,750
36,940 2,445 38,449
Current assets
Cash 5,000 800 5,800
Accounts receivable 7,500 335 7,835
Inventory/stock 6,200 520 6,720
Non-current assets
Land 14,290 320 14,610
Vehicles, at cost 3,450 500 (b) 600 4,550
Vehicle-accumulated depreciation (450) (30) (d) 20 (b) 700 (1,160)
Investment in Brothers Ltd 950 - (a) 950 -
Goodwill (a) 80 80
Accumulated impairment loss -
Goodwill (f) 10 (10)
Deferred tax asset (c) 30 (e) 6 24
36,940 2,445 38,449
WN-1: Calculation of Goodwill on acquisition

Particulars Amount ($)
Share capital 600,000
Reserves 120,000
Retained earnings 150,000
Total value of assets and liabilities acquired 870,000
Consideration transferred 950,000
Goodwill on acquisition 80,000
WN-2: Consolidation Worksheet entries as on 1 July, 2016
Sr. No. Particulars Amount ($) Remarks
(a) Share capital 600,000
This entry is required to eliminate
the investment in brothers ltd
Reserves 120,000
Retained earnings 150,000
Goodwill 80,000
To Investment in Brothers Ltd (950,000)
WN-3: Consolidation Worksheet entries as on 30 June, 2017
Elimination of Gain on sale of vehicle
On 1 July, 2016, Brothers Ltd sold vehicle to Sisters Ltd at a profit of $100,000 i.e. 900,000 less 800,000. Since, the
transactions is intra group and the profit recorded is an unrealized profit, hence the same needs to be eliminated. The
entry for elimination of gain on sale of vehicle is as below:
(b) Gain on sale of vehicle Dr. 100,000
Vehicle Dr. 600,000
To Accumulated Depreciation Cr. 700,000
Recording tax impact of elimination of Gain on sale of vehicle
Every profit and loss transaction has a tax impact, hence in the above elimination of profit transaction also, there is
an tax impact on the reversal of gain on sale of vehicle and is calculated at 30% of 100,000. Hence, this tax impact is
recorded via below mentioned entry.
(c) Deferred tax asset Dr. 30,000
To Income tax expense Cr. 30,000
Recording reversal of depreciation on Gain on sale of vehicle
Since, due to intra group transaction of sale of vehicle on gain, the Sisters Ltd has recorded the vehicle at a cost
higher than its carrying amount i.e. at 900,000. Since, the involved gain is a notional gain and is eliminated, the
depreciation impact of such gain is also required to be reversed. This reversal of depreciation is calculated by
dividing the gain with remaining useful life i.e. 100,000 divided by 5 years. Hence, the entry for reversal of
depreciation is as below:

(d) Accumulated depreciation (100,000/5) Dr. 20,000
To Depreciation expense Cr. 20,000
Recording tax impact on above reversal of depreciation
Since, the reversal of depreciation will increase the profit of the company, so additional tax burden due to this
reversal also needs to be taken care off. This impact is calculated at 30% of $20,000 and the entry for the same is as
below:
(e) Income tax expense Dr. 6,000
To Deferred tax asset Cr. 6,000
Recording impairment of goodwill
The directors of Sisters Ltd. Estimated that the purchased goodwill has been impaired and hence, the impairment
loss on goodwill needs to be recorded. The journal entry for the same is
(f) Impairment loss Dr. 10,000
To Accumulated impairment loss - Goodwill Cr. 10,000