(Solution) Allteck Building Ltd ("Allteck") build luxury homes. In an attempt to vertically integrate their business, they acquired all of the shares... > Snapessays.com

(Solution) Allteck Building Ltd ("Allteck") build luxury homes. In an attempt to vertically integrate their business, they acquired all of the shares...

consolidation question!I am waiting online, thank u sooooo much!Allteck Building Ltd (“Allteck”) build luxury homes.


In an aTempt to ver±cally integrate their


business, they acquired all of the shares of Landfry Ltd (“Landfry”) on 1 July 2016 on an ex-


dividend basis.


Due to a downturn in the property market, Landfry made a loss in the prior


year for the Frst ±me. Legal and accoun±ng fees related to the acquisi±on totalled $11000.


On 1 July 2016, Landfry had the following in its balance sheet;


Share capital




General Reserve




Retained earnings/






Dividends Payable






$275,000 (carrying amount of $85,000)


²air value of $65,000






²air value of $60,000


Land inventory




²air value of $2,900,000


Building premises


$600,000 (carrying amount of $120,000)


²air value of $850,000






²air value of Nil


2016/2017 impairment tes±ng reduces the carrying value of goodwill to $10,000.




building premises and plant are being depreciated on a straight-line basis over 20 years and


10 years respec±vely.


³he building was acquired on 1 Jan 2001 and the plant has a further 3


years of deprecia±on remaining.


³he trademark is considered to have an indeFnitely life.


Landfry currently has a legal dispute with a customer who claims that they were not advised


of problems with the ±tle of some land.


³hey are suing Landfry for $350,000 and the


directors believed there was a 35% chance of success at that stage.


³his was seTled on


15/5/18 for $80000.


All of the inventory was sold in the 2016 year.


Addi±onal informa±on




³he business turned around and on 1/3/18, Landfry was able to pay a $30,000




Shareholder approval is not required in rela±on to payment of






On 1/1/17, a parcel of land cos±ng Landfry $450,000 on 30 Nov 2016 was sold to


Allteck for $620,000 to build a display home.


It is not expected that this land will


be sold in the immediate future.




On 30/06/17, Allteck sold a motor vehicle to Landfry for $50,000 for use by one


its sta´.


³he vehicle cost Allteck $80,000 in Jan 2017 and it had a carrying value


of $65,000 at the date of sale. ³he M/V was being depreciated on a straight line


basis over 5 years.




During the 2017/2018 year, Landfry began selling some of the land acquired in


Jan 2018 to Allteck to include as a home and land package.


³here were two


blocks sold during the year, which cost Landfry $300,000 and $380,000.




were sold to Allteck at a 15% margin.


Only the Frst block was sold before 30


June 2018 with Allteck recording the other block as part of their work in progress


Solution details:

This question was answered on: Sep 21, 2023

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Sep 21, 2023





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