Financial

Financial Accounting

Answer 1

There is right to the investors to control the investee when it is exposed or possess rights for generating variable returns through the involvement of investee and affect those returns by exerting power over the investee. As per the AASB 10, it is recommended to the finance director of MC is that the control model includes the three elements such as power of an investor, power over the investee and return to the investor etc.

in case of power over the investee, the investors should have an voting rights in the equity, preferences share etc. It is finding that those fulfilling their responsibilities, governing bodies then they have rights to become the members of particular company (Walton, 2016). Return to the investor is another criterion which has an ability to use the power in order to influences the return of the investors. Besides that, link between power and return helps the company to make an growth in future.

Answer 2

Consolidated statement of financial position
ParticularAmount ($000)
Assets
Cash120
Accounts receivable100
Inventory263
Land1000
Property Plant and  equipment1600
Accumulated  depreciation-613
Investment in TakeltEasy Ltd900
Total  non-current assets3370
Liabilities
Accounts payable200
Dividends payable150
Loan810
Shareholders’ equity
Share capital1500
Retained earnings800
Total shareholders’ equity3370

 

Reconciliation of opening and closing retained earnings
Profitaftertax400190
Retained earnings — 30June2018300200
Interim dividend90-40
Finaldividend110-50
Retained earnings — 30June2019500300

 

Goodwill paid
Consideration paid900000
Fair value of non controlling interest7200001620000
Assets acquired530000
Liabilities assumed300000230000
Goodwill1390000

 

Goodwill = (Consideration paid + Fair value of non controlling interest) – (Assets acquired – Liabilities assumed)

(900000 + 720000) – (530000 – 300000)

= 1390000

NCI equity = Beginning NCI equity Fair Value + NCI’s interest in subsidiary income – NCI’s share of dividends

700000 + 60000 – 40000

= 720000

Answer 3

Deferred Tax worksheet for I Love Corporate Accounting Ltd
Statement of profit or loss and other comprehensive income for the year ended 30 June  2019
GrossProfit7,30,000
Expenses
Administration expenses80,000
Salaries2,00,000
Long-service Leave20,000
Warranty expenses10,000
Depreciation expense – plant64,000
Insurance30,0004,04,000
Accounting profit before tax3,26,000
Other comprehensive incomeNil
Taxation 30%97800
Less: Tax considered on credit sales (credit sales = 100000)3000067800
Profit after taxation 2,96,000
Assets and liabilities as disclosed in the statemet of financial positions as at 30 June 2019
Assets
Cash20,000
Inventory1,00,000
Accounts receivable1,00,000
Prepaid Insurance10,000
Plant – cost4,00,000
Less: Accumulated depreciation64,0003,34,000
Total assets5,64,000
Liabilities
Accounts payable80,000
Provision for warranty expenses20,000
Loan payable2,00,000
Warranty expenses were accruedPaid20,000
Total liabilities3,20,000
Net assets2,44,000

 

Answer 4

  1. According the provided information, it is found that Wiley & Sons Australasia Ltd is going to acquire to 70% share of Wiley Plus. As concerning concern of this, remaining percent will be known as the non controlling interest an d fair value of the net controlling interest will be $428571. As concerning the faire value, the amount of goodwill pursuant will be recorded by $728571 (1000000 + 428571-700000).
  2. As concerning of the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, the goodwill pursuant recorded by $321000 (1000000+70000*0.3 – 700000).
  3. In the business environment, there are some implications of allowing the group to concern the goodwill. In this, the company should effective identify the assets acquired, liabilities assumed and other non-controlling interest in the acquisition.

Answer 5

 

Consolidated worksheet for FinalHeadache Ltd
FinalHeadache LtdSolutions Ltd
($000)($000)
Sales revenue600500
Costs of goods sold464-238
Gross Profit136738
Dividends received from Solutions  Ltd93
Management fee revenue26.5
Gain on sale of plant4035
operating income295.5773.00
Expenses
Administrative  expenses30.838.7
Depreciation29.556.8
Management fee expenses26.526.5
Other expenses101.172
187.9194
Profit before tax107.6579
Tax expense32.28173.7
Profit for the year75.32405.3
Retained earning — 30 June  2018319.4239.2
394.72644.5
Dividends paid137.493
Retained earnings at 30 June  2019257.32551.5
Statements of financial position
FinalHeadache LtdSolutions Ltd
($000)($000)
Shareholders’ equity
Retained earnings257.32551.5
Share capital Current liabilities Accounts payable350200
Current liability54.746.3
Tax payable32.28173.7
Non-current liabilities
Loans173.5116
867.81087.5
Current assets
Accounts receivable59.462.3
Inventory6148
Non-current assets
Land & Buildings224326
Plant – at cost299.85355.8
Accumulated depreciation – plant-85.75-138.8
Investment in Solutions Ltd472
945.5634.3

 

 References

Christensen, H.B., Lee, E., Walker, M. and Zeng, C. (2015) Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), pp.31-61.   

Mora, A. and Walker, M. (2015) The implications of research on accounting conservatism for accounting standard setting. Accounting and Business Research, 45(5), pp.620-650.

Walton, P. (2016) Aiming for Global Accounting Standards–The International Accounting Standards Board 2001–2011.

Wang, C. (2014) Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer. Journal of Accounting Research, 52(4), pp.955-992.

Young, J.J. (2014) Separating the Political and Technical: Accounting Standard‐Setting and Purification. Contemporary Accounting Research, 31(3), pp.713-747.

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