Question 1 ABC Ltd acquired a Machine from BAN Ltd for the following consideration: Cash    $70 000, Land in the books of ABC Ltd the land is recorded at its cost of $700 000. It has a fair value of $750 000. ABC Ltd also agrees to assume the liability of BAN Ltd bank loan of $95 000 as part of the Machine acquisition.   REQUIRED  (a) Calculate the acquisition cost of the Machine (b) Provide the journal entries that would appear in ABC Ltd’s books to account for the acquisition of the Machine   Question 2 An item of depreciable machinery is acquired on 1 July 2015 for $280 000. It is expected to have a useful life of 10…

Question 1 An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year. Depreciation for the year is based on the revalued amount and the remaining useful life of eight years. Shareholders’ equity, before adjusting for the above revaluation and subsequent depreciation, is as follows:   Share capital 600 000 Revaluation surplus 90 000 Capital profits reserve 170 000 Retained earnings 140 000 Total 1 000 000   Required: Prepare journal entries to reflect the revaluation of the asset and the subsequent depreciation of the revalued asset. Which of the equity accounts would be affected directly or indirectly by the revaluation?     Question 2 ABC Ltd…

Berry Ltd acquired 70% of the shares of James Ltd on 1st July 2016 for $540,000. The James Ltd equity consisted of the following items at acquisition date   Share Capital                                                    $500,000 General Reserve                                                   80,000 Retained Earnings                                                 50,000 Asset revaluation reserve                                         20,000   All identifiable assets and liabilities of James Ltd are recorded at fair value at this date except for inventory for which the fair value was $10,000 greater than carrying amount and plant which had a carrying amount of $150,000 (Accumulated depreciation net of $40,000) and a fair value was $170,000. The plant has a further 5 years life. The Financial information for…

Cabarita Ltd (Cabarita) acquired 100% of the shares of Kakadu Ltd (Kakadu) on 1 July 2019. The cost of investment was $620 000. At that date the capital and reserves of Kakadu were: Share capital            $260 000 Retained earnings    $200 000   At the date of acquisition all assets of Kakadu were considered to be fairly valued, except for a plant that had a fair value $20 000 greater than its carrying amount. The cost of the plant was $100 000 and it had accumulated depreciation of $60 000. The plant had original estimated useful life of 10 years.   During financial year 01/07/2019-30/06/2020, Kakadu sold $30 000 in inventory to Cabarita for on-sale to external parties. The inventory…

Sam Ltd enters into a 5 years lease non-cancellable agreement with West Ltd on 1st July 2020. The lease is for an item of truck that has a fair value of $476912 at the inception of the lease. Sam Ltd’s incremental borrowing rate is 9% The truck is expected to have an economic life of 6 years, after which it will have an expected residual salvage value of $50,000. There is a purchase option that Sam Ltd will be able to exercise at the end of 5 year for $70,000. The rate of interest implicit in the lease is quoted as being 8%. There are to be 5 annual payments of $120,000 being made at the end of each year along…

Question 1  Morning Star Ltd was registered on 1 July 2020, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2020 inviting the public to apply for 3 600 000 Ordinary A class shares at $7.00 per share. The terms of the shares on issue are $3.00 on application, $2.00 on allotment and a future call of $2.00. If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess application money will be applied to allotment and calls before any refunds will be given. On 30 July, applications…

Michael J owns renovation business under the name New Home. Financial data for New Home as of 30 June 2019 are shown as below: $ $ Accounts receivable 109,500 Wages expense 117,000 Renovation revenue 300,000 Advertising expense 48,000 Interest Income 13,500 Prepaid insurance 13,500 Accounts payable 132,000 Insurance expense 10,500 Cash at bank 72,000 Equipment 285,000 Michael J, capital ?   Required: a) Prepare an income statement for the business for the year ending 30 June 2019. b) Prepare a balance sheet in narrative format for New Home as at 30 June 2019.

Melissa Ltd purchased all the issued shares of Soren Ltd for $1115000 on 1 July 2020 when the equity of Soren Ltd was as follows; Share capital 446000 General reserve 334500 Asset revaluation surplus 167250   At this date, Soren Ltd had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the followings;   Account Cost Carrying Amount Fair value Further life(Years) Inventories   $33,500 $36,900   Land   $84,000 $92,000   Furniture $130,000 $104,000 $125,000 10 Contingent Liability Soren Ltd identified at acquisition date a lawsuit where Soren Ltd was sued by a former supplier with the Fairvalue of: $13,000   Unrecorded Asset Soren Ltd had unrecorded and internally generated Patent with…

Beckett Pumps is a manufacturer of commercial and heavy industrial Pumps. The firm’s two product lines are called Directlift and Gravity. The primary raw materials are flexible steel sheets, and 23cm x 60cm of plastic sheets. Each Directlift pump requires a 2/3 of a meter and a Gravity pump requires a one metre of steel sheet. Allowing for normal breakage and scrap steel sheet, the company can cut either enough to make four Directlifts or two Gravity pumps from a single steel sheet. Other raw materials are costly and treated as indirect materials. Jo Smith Beckett Pump’s accountant has gathered the following information in preparation for the company’s annual budget for the next year.   Sales in the fourth quarter of…