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Consolidated Financial Statement
On 1st July 2009, United States Ltd acquired 60% of the shares of Peru Ltd for $108,000. On the same day, Peru Ltd acquired 80% of the shares ( div.) of Canada Ltd for $71,600. At the acquisition date, Peru Ltd’s and Canada Ltd’s financial statements showed the following balances:
Peru Ltd Canada Ltd
Share Capital $100,000 $60,000
General Reserve 30,000 20,000
Retained Earnings 15,000 8,000
Dividend Payable 5,000

The dividend of Canada Ltd was paid later in 2009.
On July 2009, all identifiable assets and liabilities of Peru Ltd and Canada Ltd were recorded at fair values except for the following:
Peru Ltd Canada Ltd
Carrying Amount Fair Value Carrying Amount Fair Value
Plant and machinery (cost $80 000) $60 000 $80 000 - -
Inventory 40 000 50 000 $30 000 $40 000
Vehicles - - 50 000 55 000



The vehicles have an expected useful life of 4 years and the plant is expected to last a further 10 years. Benefits are expected to be received evenly over these periods. All inventory on hand at 1 July 2006 was sold by 30 June 2007. When assets are sold or fully consumed, any related valuations reserves are transferred to retained earnings.





The financial statements of the three companies at 30 June 2010 are shown below:
United States Ltd Peru Ltd Canada Ltd
Sales Revenue $520 000 $365 000 $115 000
Other Revenue 160 000 105 000 58 000
680 000 470 000 173 000
Cost of Sales 410 000 190 000 86 000
Other Expenses 146 000 180 000 42 000
556 000 370 000 128 000
Profit before income tax 124 000 100 000 45 000
Income Tax expenses 51 000 40 000 20 000
Profit 73 000 60 000 25 000
Retained earnings (1/7/09) 24 000 15 000 8 000
97 000 75 000 33 000
Interim dividend paid 10 000 15 000 3 000
Final dividend declared 16 000 8 000 4 000
Transfer to general reserve 25 000 6 000 4 000
51 000 29 000 11 000
Retained earnings (30/06/10) 46 000 46 000 22 000
Share Capital 250 000 100 000 60 000
General Reserves 145 000 36 000 24 000
Bank Overdraft 21 000 6 000 20 000
Provisions 417 000 30 000 20 000
Current Tax Liability 55 000 42 000 26 000
Deferred Tax Liability 25 000 12 000 8 000
Dividend Payable 16 000 8 000 4 000
599 000 280 000 184 000
Bank 49 000 25 000 32 000
Receivables 61 200 17 000 16 000
Inventory 108 000 41 800 68 000
Dividend Receivables 4 800 3 200 -
Shares in Peru Ltd 105 000 - -
Shares in Canada Ltd - 67 600 -
Deferred Tax Asset 21 000 15 400 8 000
Plant 200 000 180 000 -
Accumulated Depreciation (48 000) (70 000) -
Vehicles 130 000 - 100 000
Accumulated Depreciation (30 000) - (40 000)
599 000 280 000 184 000




Additional information
(a) Included in the ending inventory of Peru Ltd was inventory purchased from Canada Ltd for $10 000. This had originally cost Canada Ltd $8000.
(b) United States Ltd had sold inventory to Canada Ltd during the period for $25 000. This had cost United States Ltd $20 000. Half of this has been sold to external parties by Canada Ltd during the year for $15 000.
(c) The tax rate is 30%.

Required
Prepare the consolidated financial statements for United States Ltd and its subsidiaries, Peru Ltd and Canada Ltd, for the period ending 30 June 2010.

[fskns]

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