Advanced Financial Assignment

ASSIGNMENT

CONSOLIDATED FINANCIAL STATEMENTS

On 1 July 2012, Captain Ltd acquired all the shares of Stirling Ltd. The recorded equity of Stirling Ltd at that date was:

Share Capital $100 000

General Reserve $50 000

Asset Revaluation Reserve $31 000

Retained Earnings $27 000

At acquisition date, all the identifiable assets and liabilities of Stirling Ltd were recorded at amounts equal to fair value except for:

Carrying Fair

Amount Value

Inventory $38 000 $42 000

Equipment (cost $210 000) 162 000 177 000

Manufacturing Licence 100 000 120 000

Packing Plant (cost $60 000) 40 000 34 000

(*)Stirling Ltd has recorded goodwill of $5 000 acquired via a business combination undertaken in 2010. On 30 June 2013, the directors of Stirling Ltd, under instructions from Captain Ltd wrote off the goodwill asset as fully impaired.

The manufacturing licence has a term of 20 years but can then be renewed for an indefinite period. Stirling Ltd intends to renew the licence.

(*)Additionally, Stirling Ltd owns, but has not recognised, a patent for the design of a specialized packing machine. The patent has a fair value at 1 July 2012 of $42 000 and will expire on 30 June 2016. On 25 June 2014, the chief financial officer of Captain Ltd assessed that, due to changed market conditions the patent was impaired by $5 000.

(*)On 1 July 2012, Stirling Ltd was involved in a dispute with a customer about the supply of faulty goods. A court hearing is scheduled for November 2012 and lawyers for Captain Ltd have advised that damages are likely to amount to $12 000. Subsequently, the court found Stirling Ltd guilty and damages of $11 500 were paid in December 2012.

Of the inventory on hand in Stirling Ltd at 1 July 2012 seventy percent (70%) was sold during the year ended 30 June 2013 with the balance being sold by 30 June 2014.

The packing plant, which had a further three-year life on acquisition date was sold on 1 April 2014 and replaced...