Question 1
ABC Ltd was registered on 30 June 2019. The next day, the directors issued a prospectus inviting applicants for 400000 ordinary shares with an issue price of $2. The shares were payable in full on application. By 31 July, the company had received 500000 applications, together with the application monies. The directors allotted 400000 shares on 1 August and returned the money for additional applications.
Required:
- Prepare general journal entries to record the above data.
- Enter the above data into ledgers.
Question 2
Jamuna River Ltd purchased a parcel of assets and liabilities comprising a business directly from Lyneham Pty Ltd. The parcel, measured at net fair values, consisted of:
Balance of Accounts:
Plant 150,000
Land 240,000
Vehicles 120,000
Accounts receivable 30,000
Accounts payable (48000)
Total 492000
Required:
Prepare journal entries to record the acquisition by Jamuna River Ltd, assuming that:
(i) The cost of acquisition was $600,000 cash.
(ii) The cost of acquisition was $432,000 cash.
Question 3
On 1 July 2018, Sunflower Ltd acquired 90% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the year ending 30 June 2019. Tax assumed 30%.
- During the 2018 – 2019 period, Sunflower Ltd sold inventory to Palm Ltd for $1600,000. Sunflower Ltd purchased this inventory at $1000,000. By 30 June 2019, Palm Ltd has sold 70% of that inventory to third party.
- Palm Ltd declared a final dividend of $1300, 000 from current year’s profits.
- Palm Ltd paid Sunflower Ltd, a fee for administrative services they provided of $40,000.
- Palm Ltd has an intra-group loan with Sunflower Ltd. Sunflower Ltd provided a loan of $10,000,000. The loan charges 4% interest annually. One half of the interest for the current year remains unpaid at 30 June 2019.
- Palm Ltd sold a land to Sunflower Ltd for $560000. The land was purchased by Palm Ltd at $ 300000.
Required:
- Prepare the journal entries required to eliminate the intra-group transactions above.
- When are profits realised in relation to inventory transfers within the group?
Question 4
On 1st July, 2018 Nile Ltd Ltd acquired 70% of the share capital of Amazon Ltd for $80,000,000.
Equity of Amazon Ltd at acquisition date was:
Share Capital $ 52,000,000
General Reserve $ 20,000,000
Retained Earnings $ 10,000,000
All assets of Amazon Ltd were recorded at fair value on acquisition, except for one property which had a fair value which was $2,000,000 lower than its carrying amount. The cost of the property was $20,000,000 with accumulated depreciation of $12,000,000. Ignore Taxes.
Required:
- Complete the worksheet below using the NET method.
- Prepare the consolidation adjustments and eliminations entries and recognise the NCI in the pre-acquisition equity of Amazon Ltd, assuming that the NCI was measured at the proportionate share of the acquiree’s identifiable net assets.
|
Elimination of Investment in Amazon Ltd |
Amazon Ltd (S) $,000 | Nile Ltd Ltd
(70% of Amazon ) (P) $,000 |
30% NCI
$,000 |
| Fair Value of consideration transferred | |||
| Less: FV of identifiable assets acquired & liabilities assumed | |||
| Share capital on acquisition date | 52,000 | ||
| General reserve-acquisition date | 20,000 | ||
| Retained earnings-acquisition date | 10,000 | ||
| Fair value adjustment | |||
| Goodwill on acquisition | |||
| Non-controlling interest |
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