On 1 July 2018, Red River Ltd acquired 70% of the share capital

On 1 July 2018, Red River Ltd acquired 70% of the share capital of Mekong Ltd for $1,200,000. The equity of Mekong Ltd was: Share Capital                     $1,050,000 General Reserve               $   300,000 Retained Earnings            $   150,000   All assets of Mekong Ltd were recorded at Fair Value (FV) on acquisition, except for a piece of equipment that had a higher FV ($50,000) than its carrying amount. The cost of the equipment was $300,000, and accumulated depreciation is $196,000. The tax rate is 30% Required:   Complete the worksheet below using the “Gross Method”. Elimination of investment is subsidiary (Mekong Ltd) Mekong Ltd         $ Red River Ltd 70% interest 30% NCI    $ FV of consideration transferred 1,200,000   1,200,000 *Plus NCI measured at…

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On 1 July 2018, River Ltd acquired 90% of the share capital to gain control of Creek Ltd

On 1 July 2018, River Ltd acquired 90% of the share capital to gain control of Creek Ltd.  The following intra-group transactions occurred during the year ending 30 June 2019. During the 2018 – 2019 period, River Ltd sold inventory to Creek Ltd for $2,000,000.  River Ltd purchased this inventory for $1,700,000. By 30 June 2019, Creek Ltd has 30% of that inventory still on hand as unsold. Creek Ltd declared a final dividend of $1,500,000 from current year’s profits. Creek Ltd paid Water River Ltd, a consultancy fee of $70,000 during the year. River Ltd provided a loan of $10,000,000 to Creek Ltd. The loan charges 5% interest One half of the interest for the current year remains unpaid as…

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The following information relates to Brunswick Ltd

The following information relates to Brunswick Ltd. At the beginning of the accounting period the company has a wages payable liability of $300 and at the reporting date a wages payable of $720. During the year the wages expense shown in the income statement was $700. At the beginning of the accounting period the company has property plant and equipment (PPE) with a carrying amount of $800. At the end of the accounting period, the carrying amount of the PPE is $2,400. During the year depreciation charged was $160, a revaluation surplus of $480 was recorded and PPE with a carrying amount of $120 was sold for $160. At the beginning of the accounting period the company has retained earnings of…

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Great Sand Ltd offers $200 million in debentures, which is payable on application

Great Sand Ltd offers $200 million in debentures, which is payable on application. The Interest rate on debentures is 8% per annum, payable annually. By 15 June 2018, applications are received for $240 million debentures. The debentures are allotted on 1 July 2018, which coincides with Great Sand Ltd’s financial year-end.

 

Required:

Prepare the journal entries to record the issue of the debentures and the annual interest payments on 30th June 2019.

Limo Belle Services, Media Medium and Fortress Reconstruction Inc.

Scenario #1: Financial statements and ratios Below you will find the list of accounts of Limo Belle Services Inc. (in Canadian dollars)   September 30, 2012 September 30, 2011 Accumulated Depreciation – limousines 30,000 20,000 Depreciation Expense – limousines 10,000 Other expenses 70,000 Retained earnings 4,000 4,000 Share capital 1,000 1,000 Income taxes 35,000 Wages 100,000 Limousines 90,000 60,000 Dividends declared 80,000 Cash 2,000 4,000 Note payable (non-current) 50,000 30,000 Expenses payable 10,000 Accounts Receivable 1,000 Sales 300,000 Wages payable 2,000   From this list of accounts, prepare the following: an Income Statement for period ended Sept. 30, 2012 a Balance Sheet as of Sept. 30, 2012 with comparative figures for 2011 – a Statement of Stockholders’ Equity as of Sept.…

Murungi Co. Ltd. Extracted the following trial balance

Murungi Co. Ltd. Extracted the following trial balance as on 31st December, 2004. Dr                               Cr Shs.                              Shs. Share Capitalrrtt 250,000 ordinary shares of Shs.100 each                                                                         25,000,000 125,000 10% preference shares of Shs. 100 each                                                             12,500,000 10% debentures                                                                                                             10,000,000 Freehold premises at cost                                                           25,000,000 Motor vehicles at cost                                                                 7,500,000 Fixtures and fittings                                                                    1,300,000 Plant and machinery at cost                                                         2,500,000 Profit and loss A/C, 1 Jan 2004                                                                                        2,685,000 Sales                                                                                                                            59,475,000 Stock at 1 Jan 2004                                                                   10,775,000 Bad debts written off                                                                      125,000 Purchases                                                                                 16,900,000 Dividends paid at 30 June 2004 Preference dividend                                                                       625,000 Ordinary dividend                                                                       1,250,000 Debenture interest paid at 30 June 2004                                            500,000 Trade Debtors/Creditors                                                               2,700,000                    1,500,000 Accumulated depreciation…

The cash flows shown below were extracted from the accounts of Jason Taylor

Question 1 The cash flows shown below were extracted from the accounts of Jason Taylor, a music shop owner. Repayment of loan $390 000 Sale of property 390 000 Interest received 1 560 Payment to employees 78 000 Receipts from customers 273 000 Expenses paid 23 400 Computer equipment purchase 23 400 GST paid 780 Payments to suppliers 156 000 Income taxes paid 3 120 Beginning cash balance 7 800 A. Prepare a statement of cash flows using the direct method. B. Outline some cash flow warning signals. Question 2 Selected information for two companies competing in the catering industry is presented in the table below: Account Name  Lawson  Dawson Current assets $110,500 $167,900 Non-current assets $250,000 $299,000 Current Liabilities $58,600…

An item of depreciable machinery is acquired on 1 July 2016 for $280 000

Question 1 An item of depreciable machinery is acquired on 1 July 2016 for $280 000. It is expected to have a useful life of 10 years and a zero-residual value (straight-line). On 1 July 2020, it is decided to revalue the asset to its fair value of $150 000. Required: Provide journal entries to account for the revaluation.   Question 2 On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Required: (i) Determine the issue price of…

The Ronald Co Ltd (RCL) is contemplating a $40 million

The Ronald Co Ltd (RCL) is contemplating a $40 million national duplication of its replica division. It has forecast after-tax cash flows for the project of $10 million per year in perpetuity. The average yield to maturity of RCL’s is 8 per cent, and its cost of equity capital is 15 per cent. The tax rate is 30 per cent. Harry Lehman, the company’s chief financial officer, has come up with two financial options: A $20 million issue of 10-year debt at 8 per cent interest. The issue costs would be 1 per cent of the amount raised. A $20 million issue of ordinary shares. The issue costs would be 12 per cent of the amount raised. The target debt/equity ratio of…

Tassie Ltd is considering replacing an old management system with a new one

Tassie Ltd is considering replacing an old management system with a new one. Use the following information to determine the feasibility of this replacement plan.   Costs of new system: ……………………………………………………………….. $80,000 Costs of old system: ………………………………………………………………… $95,000 Depreciations of new system: …………………………………….. Prime-cost to zero Depreciations of old system: ………………………………………….. $5,000 per year Life of old system: ……………. will be written off in 5 years if no replacement Life of new system: ………………………………………………………………….. 5 years Salvage value of new system at the end of its life: ………………………. $18,000 Salvage value of old system at the end of its life: ………………………………… $0 Market value of the old system now: …………………………………………. $55,000 Total savings from the new system: ………………………………. $10,000 per year…

Halley Company – Cash Flow – Indirect Method

The comparative financial statements for Halley Company for 2018 and 2019 are presented below. Halley Company Comparative Balance Sheets For years ended 2018 and 2019 June 30 2019 June 30 2018 Assets $ $ Cash 53,000 52,000 Accounts receivable 106,000 93,000 Inventory 162,000 151,000 Land 300,000 300,000 Buildings and equipment (at cost) 845,000 790,000 Less: Accumulated depreciation (514,000) (460,000) Total Assets 952,000 926 Liabilities and Share Equity Accounts payable 141,000 136,000 Interest payable 8,000 10,000 Mortgage payable 109,000 120,000 Share capital 520,000 520,000 Retained earnings 174,000 140,000 Total Liabilities and Share Equity 952,000 926,000   Halley Company Statement of Profit and Loss for the year 2019 $ $ Sales revenue 1,200,000 Cost of goods sold (788000.00) Gross profit 412000.00 Other expenses:…

The comparative financial statements for Halley Company for 2018 and 2019

The comparative financial statements for Halley Company for 2018 and 2019 are presented below. Halley Company Comparative Balance Sheets For years ended 2018 and 2019 June 30 2019 June 30 2018 Assets $ $ Cash 53,000 52,000 Accounts receivable 106,000 93,000 Inventory 162,000 151,000 Land 300,000 300,000 Buildings and equipment (at cost) 845,000 790,000 Less: Accumulated depreciation (514,000) (460,000) Total Assets 952,000 926 Liabilities and Share Equity Accounts payable 141,000 136,000 Interest payable 8,000 10,000 Mortgage payable 109,000 120,000 Share capital 520,000 520,000 Retained earnings 174,000 140,000 Total Liabilities and Share Equity 952,000 926,000   Halley Company Statement of Profit and Loss for the year 2019 $ $ Sales revenue 1,200,000 Cost of goods sold (788000.00) Gross profit 412000.00 Other expenses:…