Rivergum Ltd issues 10,000 shares at $10 per share on 1 July 2020. The cost of issuing share is $2,000. According to the company policy the sharehol
Rivergum Ltd issues 10,000 shares at $10 per share on 1 July 2020. The cost of issuing share is $2,000. According to the company policy the shareholders are required to pay $6 immediately and $4 in 12 months time. In 12 months time, Rivergum Ltd makes a call on the shareholders for the remaining $4 per share and the payment for this is due on 31 July 2021. The shareholders of 9,000 shares pay the required call by 31 July 2021. Rivergum Ltd forfeit 1000 shares for which shareholder fails to pay the call money by 10 August 2021.
Required:
Prepare journal entries on: (i) 1 July 2020, (ii) 1 July 2021, (iii) 31 July 2021, and (iv) 10 August 2021.
Moon Ltd acquired a plant for the cost of $58,000. It is expected that the plant will continue to be operational for seven years. The estimated residual value of the machine is $14,000 at the end of its useful life.
Required:
Calculate the depreciation charges in accordance with AASB 116 Property, Plant and Equipment for each of the first three years and prepare journal entries for the first year using the following methods:
Straight-line method
Declining-balance method, using a 33 per cent rate
Hoppers Ltd commences operations on 1 July 2021. One year after the commencement of its operations, 30 June 2022, the entity prepares the following information, showing the carrying amounts for accounting purposes of the assets and liabilities.
Assets and Liabilities extracted from Statement of Financial Position as at 30 June 2022
Assets Cash at Bank $320,000
Inventories 680,000
Accounts receivables (net) 2,000,000
Allowance for doubtful debts (220,000)
Machinery 2,000,000
Accumulated depreciation - machinery (1,040,000)
Total Assets 3,740,000
Liabilities Accounts payable 1,160,000
Revenue received in advance 100,000
Bank loan 600,000
Provision for annual leave 240,000
Total Labilities 2,100,000
Net Assets 1,640,000
Additional information
The taxable profit is $2,000,000 which is calculated after adjusting for differences between tax legislations and accounting rules.
No bad debt was written off during the period.
Depreciation for tax purposes of machinery for the year ended 30 June 2022 amounted to $1,560,000.
The tax rate is 30%.
Required:
Complete the Taxation Worksheet provided on page 5 in accordance with AASB 112: Income Taxes. Tax bases of assets and liabilities are provided on taxation worksheet. [Copy the table provided in page 5 and paste it in your answer document to complete the Deferred Tax Worksheet].
(5.5 Marks)
Prepare the applicable journal entries to account for the income tax adjustments using the balance sheet method as at 30 June 2022.
(2.5 Marks)
Hoppers Ltd
Deferred tax worksheet at 30 June 2022
Carrying Amount Tax Bases Deductible Temporary Differences Taxable Temporary Differences Income tax expense Income tax payable
$ $ $ $ Assets Cash at Bank 320,000 320,000 Inventories 680,000 680,000 Accounts receivables 1,780,000 2,000,000 Machinery 960,000 440,000 Total Assets 3,740,000 3,440,00 Liabilities Accounts payable 1,160,000 1,160,000 Revenue received in advance 100,000 0 Bank loan 600,000 600,000 Provision for annual leave 240,000 0 Total liabilities 2,100,000 1,760,000 Net Assets 1,640,000 1,680,000 Temporary Differences at period end Less prior period amounts Movement for the period Tax on taxable profit @30% Income tax adjustments As at 30 June 2022, Regent Ltd showed following assets for one of its cash-generating units in its Statement of Financial Position:
Assets $
Cash at Bank 30,000
Inventory 150,000
Equipment 300,000
Machinery 500,000
Building 1,000,000
Furniture 50,000
Regent Ltd determined its recoverable amount which is higher of fair value less cost of disposal and value in use is $1,950,000.
Required:
Calculate total impairment loss; allocate impairment loss; determine net carrying amount; and provide the journal entry for any impairment loss at 30 June 2022.
Question 5 10 Marks
On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for $1,800,000, and on that date Queen Ltd.s equity were as follows: Share capital $1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000.
All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July 2021.
During the financial year 2022, the following intragroup transactions occurred between King Ltd and Queen Ltd:
Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost. The land was still hold by King Ltd.
King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate of 10% p.a. on cost.
Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. th of the inventories were still on hand with King Ltd.
King Ltd received $15,000 of service revenue from Queen Ltd.
Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd.
The tax rate is 30 per cent.
Required:
Show the relevant consolidated journal entries to eliminate investment in Queen Ltd and intragroup transactions for the year ended 30 June 2022 (including tax effects where relevant).
6.
Lalor Ltd acquires 30 per cent of issued capital of Thomas Town Ltd for a cash consideration of $100,000 on 1 July 2019. On the date of acquisition, the shareholders equity of Thomas Town Ltd is as follows:
Share capital $200,000
Retained earnings $75,000
General reserve $25,000
Additional information:
Thomas Town Ltd reports following profits and dividends for the years ended 30 June 2020 to 2021:
Year Profit before tax
$ Income tax expense
$ Profit for the year
$ Dividend paid
$
2020 80 000 24 000 56 000 20 000
2021 70 000 21 000 49,000 5 000
Lalor Ltd does not have a number of subsidiaries.
Required:
Prepare journal entries under the equity method of accounting for the investment in Thomas Town Ltd for each of the years ended 30 June 2020 to 2021.
(5 Marks)
Calculate the carrying amount of the investment in Thomas Town Ltd at 30 June 2021.
