Question 1
ABC Ltd has the following land and buildings in its financial statements as at 30 June 2022:
| Residential land, at cost | 2 000 000 |
| Factory land, at valuation 2020 | 1 800 000 |
| Buildings, at valuation 2020 | 1 600 000 |
| Accumulated depreciation | (200 000) |
At 30 June 2022, the balance of the revaluation surplus is $800 000, of which $600 000 relates to the factory land and $200 000 to the buildings. On this same date, independent valuations of the land and buildings are obtained. In relation to the above assets, the assessed fair values at 30 June 2022 are:
| Residential land, previously recorded at cost | 2 200 000 |
| Factory land, previously revalued in 2020 | 1 400 000 |
| Buildings, previously revalued in 2020 | 1 800 000 |
Required:
Provide the journal entries to account for the revaluation on 30 June 2022. ABC Ltd classifies the residential land and the factory land as different classes of assets.
Question 2
XYZ Ltd acquires 100 per cent of Red-X Ltd on 1 July 2021. XYZ Ltd pays the shareholders of Red-X Ltd the following consideration:
| Cash | 70 000 |
| Plant and equipment | fair value $250 000; carrying amount in the books of XYZ Ltd $170 000 |
| Land | fair value $300 000; carrying amount in the books of XYZ Ltd $200 000 |
There are also legal fees of $190 000 involved in acquiring Red-X Ltd.
On 1 July 2021 Red-X Ltd’s statement of financial position shows total assets of $300 000 and liabilities of $3000 000. The fair value of the assets is $800 000.
Required:
Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring Red-X using appropriate accounting standard.
Question 3
Pearson Ltd is an Australian listed company. Its results for the financial year ending 30 June 2023 have exceeded expectations—profit before tax is $11.194 million and income tax expense is $2.216 million. As at 30 June 2022, there were 11.700 million ordinary shares on issue. On 11 May 2023, 4.225 million further ordinary shares were issued at a price of $2.99—paid to $2.4. The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price.
Required:
Calculate the basic EPS for Pearson Ltd for the year ending 30 June 2023.
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