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Financial Accounting

Answer 1

There is a right to the investors to control the investee when it is exposed or possess rights for generating variable returns through the involvement of the 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 the 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 voting rights in the equity, preferences share etc. It is finding that those fulfilling their responsibilities, governing bodies then have the right to become the members of a particular company (Walton, 2016). Return to the investor is another criterion that has an ability to use the power in order to influences the return of the investors. Besides that, the link between power and return helps the company to make a growth in future.

Answer 2

Consolidated statement of financial position
Particular Amount ($000)
Assets
Cash 120
Accounts receivable 100
Inventory 263
Land 1000
Property Plant and  equipment 1600
Accumulated  depreciation -613
Investment in TakeltEasy Ltd 900
Total  non-current assets 3370
Liabilities
Accounts payable 200
Dividends payable 150
Loan 810
Shareholders’ equity
Share capital 1500
Retained earnings 800
Total shareholders’ equity 3370

 

Reconciliation of opening and closing retained earnings
Profit after tax 400 190
Retained earnings — 30 June 2018 300 200
Interim dividend 90 -40
Final dividend 110 -50
Retained earnings — 30 June 2019 500 300

 

Goodwill paid
Consideration paid 900000
The fair value of non-controlling interest 720000 1620000
Assets acquired 530000
Liabilities assumed 300000 230000
Goodwill 1390000

 

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
gross profit 7,30,000
Expenses
Administration expenses 80,000
Salaries 2,00,000
Long-service Leave 20,000
Warranty expenses 10,000
Depreciation expense – plant 64,000
Insurance 30,000 4,04,000
Accounting profit before tax 3,26,000
Other comprehensive income Nil
Taxation 30% 97800
Less: Tax considered on credit sales (credit sales = 100000) 30000 67800
Profit after taxation   2,96,000
Assets and liabilities as disclosed in the statement of financial positions as at 30 June 2019
Assets
Cash 20,000
Inventory 1,00,000
Accounts receivable 1,00,000
Prepaid Insurance 10,000
Plant – cost 4,00,000
Less: Accumulated depreciation 64,000 3,34,000
Total assets 5,64,000
Liabilities
Accounts payable 80,000
Provision for warranty expenses 20,000
Loan payable 2,00,000
Warranty expenses were accrued Paid 20,000
Total liabilities 3,20,000
Net assets 2,44,000

 

Answer 4

  1. According to the provided information, it is found that Wiley & Sons Australasia Ltd is going to acquire to 70% share of Wiley Plus. As concerning concern for this, the remaining per cent will be known as the non-controlling interest and d fair value of the net controlling interest will be $428571. As concerning the fair value, the amount of goodwill pursuant will be recorded by $728571 (1000000 + 428571-700000).
  2. As concerning the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, the goodwill pursuant was 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 interests in the acquisition.

Answer 5

Consolidated worksheet for FinalHeadache Ltd
FinalHeadache Ltd Solutions Ltd
($000) ($000)
Sales revenue 600 500
Costs of goods sold 464 -238
Gross Profit 136 738
Dividends received from Solutions  Ltd 93
Management fee revenue 26.5
Gain on sale of plant 40 35
operating income 295.5 773.00
Expenses
Administrative  expenses 30.8 38.7
Depreciation 29.5 56.8
Management fee expenses 26.5 26.5
Other expenses 101.1 72
187.9 194
Profit before tax 107.6 579
Tax expense 32.28 173.7
Profit for the year 75.32 405.3
Retained earning — 30 June  2018 319.4 239.2
394.72 644.5
Dividends paid 137.4 93
Retained earnings at 30 June  2019 257.32 551.5
Statements of financial position
FinalHeadache Ltd Solutions Ltd
($000) ($000)
Shareholders’ equity
Retained earnings 257.32 551.5
Share capital Current liabilities Accounts payable 350 200
Current liability 54.7 46.3
Tax payable 32.28 173.7
Non-current liabilities
Loans 173.5 116
867.8 1087.5
Current assets
Accounts receivable 59.4 62.3
Inventory 61 48
Non-current assets
Land & Buildings 224 326
Plant – at cost 299.85 355.8
Accumulated depreciation – plant -85.75 -138.8
Investment in Solutions Ltd 472
945.5 634.3

 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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