Assessment 2
Case Study Part A
Benny Ltd acquired 100% interest in Jets Ltd on 1 January 2024. Consideration consisted of $300,000 in cash and 10,000 shares with a fair value price of $50 per share. At that date, Jets Ltd.’s equity consisted of share capital of $100,000, retained earnings of $250,000 and asset revaluation surplus of $60,000.
On the date of the acquisition, all assets and liabilities were equal to fair value except for the following:
- Jets Ltd had inventories recorded for $200,000 which had a fair value of $440,000.
These inventories were sold to external parties by 30 June 2024 for $550,000.
- Jets Ltd.’s buildings had a fair value of $700,000. This asset has a remaining life of 20 years.
Jets Ltd.’s balance sheet disclosed the following balances on acquisition date:
- Buildings (at cost) $800,000
- Accumulated depreciation $300,000
Additional information:
- Jets Ltd has existing goodwill recorded of $101,000 – refer worksheet.
- The corporate tax rate is 30%.
The following intra-company transactions have occurred since acquisition date:
- On 15 March 2024, Benny Ltd sold inventory to Jets Ltd recording a before-tax profit of $55,000. By 1 July 2024, a stock- take recorded 100% of this inventory was still on hand for Jets Ltd. However, by 30 June 2025 all inventory was sold to external parties.
- During the year ended 30 June 2025, Jets Ltd declared a final dividend of $20,000. This was paid on 30 November 2025.
- On 28 February 2025, Jet Ltd purchased goods for $320,000 from Benny Ltd. This inventory had originally cost Benny Ltd $270,000. On 30 June 2025, 10% of inventory was still on hand.
- On 1 April 2025 Jets Ltd borrowed $100,000 from Benny Ltd. Interest is charged annually at a fixed rate of 7%. The last interest payment was made on 31 May 2025. Both companies record accruals.
Part B Video Presentation and script
Prepare a video presentation and a script (Word document only) to address each of the following questions, in relation to Part A Case study. You will be assessed on your technical understanding of each question and also your presentation skills. Please refer to the marking rubric which details the assessment criteria for the communication and presentation skills. Please ensure your presentation does not exceed the 8 minutes +/- 10% time limit. Penalties will apply if exceeded.
Please ensure your presentation includes reference to the appropriate Australian accounting standards (AASB).
Your presentation should focus on demonstrating your technical understanding of why these entries are made rather than only discussing the numeric calculations performed.
The following questions relate to Part A of this assessment:
- Discuss the accounting treatment for any prior year intragroup transactions and why these adjustments were necessary. Including tax effects.
- Justify and explain the reason for any consolidation entries you have made relating to intragroup sale of inventories in the current year, including tax effects. Provide a breakdown of your calculation for the adjustment to COGS expense.
Assessment Requirements Summary
Assessment Title: ACC603 Advanced Financial Reporting, Assessment 2
Type: Case Study (Part A) and Video Presentation with Script (Part B)
This assessment evaluates students’ understanding and application of consolidation accounting principles under the Australian Accounting Standards (AASB). It is designed to test both technical proficiency in preparing consolidated financial statements and the ability to communicate accounting treatments clearly and professionally.
Key Requirements and Tasks:
- Part A (Case Study):
Students are required to perform a detailed consolidation analysis for Benny Ltd’s 100?quisition of Jets Ltd on 1 January 2024.
The tasks involve:- Determining acquisition analysis and goodwill calculation.
- Adjusting for fair value differences in inventories and buildings.
- Accounting for intragroup transactions such as inventory sales, dividends, and intercompany loans.
- Considering tax effects (30%) in all relevant adjustments.
- Preparing consolidation elimination entries for:
- Unrealised profit on intercompany inventory sales (both prior and current year).
- Intragroup loan balances and interest.
- Intragroup dividend transactions.
- Part B (Video Presentation and Script):
Students must prepare an 8-minute video presentation (±10%) and a written script discussing the technical accounting rationale behind the consolidation entries made in Part A.
The presentation must:- Reference relevant AASB standards.
- Demonstrate conceptual understanding, not just numerical computation.
- Explain the logic behind consolidation adjustments (particularly for intragroup inventory transactions and tax implications).
- Be presented professionally and clearly, reflecting effective communication and presentation skills.
