1 East Ltd Owns 40 Of The Shares Of West Ltd And Holds The Only Substantial Block Of 2765264

1.East Ltd owns 40% of the shares of West Ltd, and holds the only substantial block of shares in that entity, no other party owning more than 4% of the shares. The annual general meeting of West Ltd is to be held in a month’s time. Scenario 1: East Ltd will be able to elect a majority of West Ltd’s board of directors as a result of exercising its votes as the largest holder of shares. As only 75% of shareholders voted in the previous year’s annual meeting, East Ltd may have the majority of the votes that are casted at the meeting. Scenario 2: By obtaining the proxies of other shareholders and, after meeting with other shareholders who normally attend general meetings of West Ltd, by votes to have its nominees elected as directors of the board of West Ltd, convincing these shareholders to vote with it, East Ltd may obtain the necessary regardless of the attendance at the general meeting. Required: Discuss the potential for West Ltd being classified as a subsidiary of East Ltd in each separate scenario above, according to the requirements of AASB 10 Consolidated Financial Statements. No more than 200 words for each scenario. 2.Rutland Ltd acquired 80% of the shares of Moreland Ltd on 1 July 2015 for $109 720. At this date the equity of Moreland Ltd consisted of: Share capital (100 000 shares) $ 80 000 General reserve 2 400 Retained earnings 29 600 All the identifiable assets and liabilities of Moreland Ltd were recorded at amounts equal to their fair values except for: Carrying amount Fair value Plant (cost $65 000) $52 000 $56 000 Land 40 000 45 000 The plant was expected to have a further useful life of 10 years. Rutland Ltd uses the partial goodwill method. At 1 July 2015, Moreland Ltd had unrecorded brands that had a fair value of $18 000. These had an indefinite life. The tax rate is assumed to be 30%. Additional information: • Moreland Ltd had inventory on hand at 30 June 2017 that included inventory at cost of $8000 that had been sold to it by Rutland Ltd. This inventory had cost Rutland Ltd $6000. It was all sold by Moreland Ltd by 30 June 2018. • During the 2017–18 year, Moreland Ltd sold inventory to Rutland Ltd for $48 000. At 30 June 2018, Rutland Ltd still had half of this inventory on hand. This inventory had been sold to it by Moreland Ltd at a profit of $8000. • On 1 January 2017, Moreland Ltd sold plant to Rutland Ltd for $16 000. This had a carrying amount in Moreland Ltd at time of sale of $12 000. Plant of this class is depreciated at 20% p.a.

 

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