Corporate Accounting - Answer 1

  1. Calculation of Company’s taxable profit and its tax payable for 2017

Particulars

$

Profit Before Tax (a)

600,000

Add: Depreciation charged in books (b)

128,000

Less: Depreciation allowed by ATO for taxation purposes(c)

160,000

   

Taxable Profits (a)+(b)-(c)

568,000

Tax Payable @ 30%

170,400

  1. Determination of Deferred Tax Liability/Deferred Tax Asset

Depreciation allowed by ATO for taxation purposes $ 160,000

Depreciation charged in Books $ 128,000

_ ________

$ 32,000

Deferred Tax Liability = 30% of 32,000= $ 9,600

  1. Journal entries on 30th June’2017

Particulars

Dr.

$

Cr.

$

Income Tax Expense

170,400

 

Tax Payable

 

170,400

     

Income Tax Expense

9,600

 

Deferred Tax Liability

 

9,600

Corporate Accounting - Answer 2

(b) Amount of goodwill (or bargain purchase) arising out of the acquisition

 Particulars

$

Fair value of Assets acquired (a)

2,640,000

Fair value of liabilities acquired (b)

720,000

 Fair value of net assets acquired (a)-(b)

(d)

1,920,000

 Purchase Consideration (e)

 2,020,000

 Goodwill (d)- (e )

100,000

(d) Amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50

 Particulars

$

Fair value of Assets acquired (a)

2,640,000

Fair value of liabilities acquired (b)

720,000

 Fair value of net assets acquired (a)-(b)

(d)

1,920,000

 Purchase Consideration (e)

 1,600,000

 Bargain Purchase

320,000

   
   

Corporate Accounting - Answer 3

Date

Particulars

Dr.

 $

Cr.

$

July’2019

Bank

36,000,000

 
 

Share Application

 

36,000,000

       

15th August 2019

Share Application

 6,000,000

 
 

Bank

 

 6,000,000

       

15th August 2019

Share Application

30,000,000

 
 

Equity Share Capital

 

30,000,000

       

20th September 2019

Share Allotment

30,000,000

 
 

Equity Share Capital

 

30,000,000

       

20th September 2019

Bank

25,000,000

 
 

Share Allotment

 

25,000,000

       

20th September 2019

Equity Share Capital

10,000,000

 
 

Forfeited Shares A/c

 

5,000,000

 

Share Allotment

 

 5,000,000

       

15th October 2019

Bank

9,500,000

 
 

Forfeited Shares

500,000

 
 

Equity Share Capital

 

10,000,000

       

20th October 2019

Forfeited Shares

4,500,000

 
 

Bank

 

4,500,000

       
       

Corporate Accounting - Answer 4

  1. The intra group transactions between the parent entity and the subsidiary entity must eliminated in full on consolidation even if the parent company does not hold 100 percent of equity of the subsidiary company
  2. Non-controlling interest is also known as minority interest. It is an ownership position, wherein a shareholder owns less than 50% of shareholding and has no control over the decisions. For e.g. ABC Ltd. buys 80% of shareholding of DEF Ltd.. The balance 20% would be called as non-controlling interest.

Disclosure requirements for Non-Controlling Interest

Non-Controlling Interest must be presented by the parent company its consolidated statement of financial position within the equity but separately from the equity of the owners of the parent.

  1. NCI is not affected by the adjustments for intra group transactions (as full effects of these transactions are eliminated on consolidation)
  2. The following are the steps involved in calculation of NCI
  • Calculate fair value of the non-controlling interest (fair value of the equity). This is the value at which you can reasonably expect to sell your holding in the market
  • Make any fair-value adjustments, if applicable
  • Add prorate income attributed to the non-controlling equity interest.
  • Subtract prorate share of dividends.
  • This final fair value will be recorded in the equity section of the consolidated balance sheet of the parent company.

Corporate Accounting - Answer 5

  1. In case of sale of current assets by the parent entity to the subsidiary entity, profit on its sale shall be eliminated to the extent of proportion of current assets still owned by possessed by subsidiary entity at the end of accounting year. The related. Hence, Accounting entry to be made shall be as follows:

Dr. Cr.

$ $

Retained Earnings 15,000

Cost of Sales 13,500

Inventory 1,500

The corresponding effect of deferred tax shall be recognised as follows

Deferred Tax Asset 450

Income Tax Expense 450

  1. No elimination entry shall be made as whole Inventory is sold by the end of accounting year.

 (b) Journal Entries

on next page

Date

Particulars

Dr.

 $

Cr.

 $

30st June’ 2017

Plant

150,000

 
 

Loss on Sale of Plant

 

150,000

       

30st June’ 2017

Income Tax Expense

45,000

 
 

Deferred Tax Liability

 

45,000

       

30st June’ 2017

Depreciation

30,000

 
 

Accumulated Depreciation

 

30,000

       

30st June’ 2017

Deferred Tax Liability

9,000

 
 

Income Tax Expense

 

9,000

 

Date

 

Dr.

 $

Cr.

 $

30th June’2018

Plant

150,000

 
 

Retained Earnings

 

150,000

       

30th June’2018

Retained Earnings

45,000

 
 

Deferred Tax Liability

 

45,000

       

30th June’2018

Depreciation

30,000

 
 

Retained Earnings

30,000

 
 

Accumulated Depreciation

 

60,000

       

30th June’2018

Deferred Tax Liability

18,000

 
 

Retained Earnings

 

9,000

 

Income Tax Expense

 

9,000

       

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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