ACC204: Accounting for Lease - Income Tax - Consolidation | Advanced Financial Accounting Assessment Answers

August 24, 2017
Author :

Solution Code: 1EDJ

Question:Financial Accounting Assignment

This assignment is related to ”Financial Accounting Assignment” and experts atMy Assignment Services AUsuccessfully delivered HD quality work within the given deadline.

Question 1: Accounting for Lease

Owing to low liquidity, Lisa Ltd decides on 1 July 2015 to sell its land and buildings to Anderson Ltd. The carrying values of the land and buildings in the books of Lisa Ltd, at 1 July 2015, are:

Question 2: Accounting for Income Tax

MR Limited commences operations on 1 July 2014 and presents its first statement of comprehensive income and first statement of financial position on 30 June 2015. The statements are prepared before considering taxation. The following information is available:

Question 3: Consolidation

Sandy Ltd acquired 100 per cent of the issued capital of Beach Ltd on 30 June 2014 for $900 000, when the statement of financial position of Beach Ltd was as follows:

These assignments are solved by our professional Financial Accounting Experts at My Assignment Services AU and the solution are high quality of work as well as 100% plagiarism free. The assignment solution was delivered within 2-3 Days.

Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Solution:

Answer 1

a)

The journal entries are as under (Leo et al. 2015):

In the books of Lisa Ltd
Date Particulars Dr Cr
01-Jul-15 Cash $ 2,167,350
land $ 1,800,000
Deferred Gain on Sale $ 367,350
sales of land
01-Jul-15 Cash $ 2,167,350
Accumulated depreciation $ 350,000
Buildings $ 1,750,000
Deferred Gain on Sale $ 767,350
sale of building
01-Jul-15 leased Land $ 2,167,350
leased Buildings $ 2,167,350
leased liability $ 2,167,350
recognistion of lease agreement
01-Jul-15 leased liability $ 600,000
cash $ 600,000
down payment
30-Jun-25 Deferred Gain on Sale $ 56,735
Gain on Sale of Leased Assets $ 56,735
amortization of gain on sale for 20 years
30-Jun-25 lease liability $ 500,000
cash $ 500,000
last lease payment
30-Jun-25 Depreciation $ 108,368
Accu. Dep on building $ 108,368
last year depreciation

 

b)

In the books of Anderson Ltd
Date Particulars Dr Cr
01-Jul-15 land $ 2,167,350
cash $ 2,167,350
purchase of land
01-Jul-15 Buildings $ 2,167,350
cash $ 2,167,350
purchase of buildings
01-Jul-15 lease receivables $ 4,334,700
land $ 2,167,350
building $ 2,167,350
recognition of lease agreement
01-Jul-15 cash $ 600,000
lease receivable $ 600,000
initial payment
30-Jun-25 cash $ 500,000
lease receivable $ 500,000
last payment

 

c)

In the books of Lisa Ltd
Date Particulars Dr Cr
30-Jun-25 Deferred Gain on Sale $ 56,735
Gain on Sale of Leased Assets $ 56,735
amortization of gain on sale for 20 years
30-Jun-25 lease liability $ 500,000
cash $ 500,000
last lease payment
30-Jun-25 Depreciation $ 108,368
Accu. Dep on building $ 108,368
last year depreciation

 

d)

In the books of Anderson Ltd
Date Particulars Dr Cr
30-Jun-25 cash $ 500,000
lease receivable $ 500,000
last payment

 

Answer 2

The journal entries are as under (Collier 2012):

Dr Cr
Income tax expense $ 78,000
Current tax liability $ 78,000
Deferred tax assets $ 6,000
Deferred tax liabilities $ 6,000

 

Current Tax Worksheet

as at 30 June 2015

Accounting profit $ 300,000
Add:
Depreciation expense - Plant $ 40,000
Long-service leave $ 20,000
Warranties expenses $ 30,000
Insurance expenses $ 10,000
Income - Rent received $ 100,000
Less:
Tax depreciation – plant $ 100,000
Warranties paid $ 10,000
Insurance paid $ 30,000
Leave paid to employees $ 140,000
Taxable profit $ 260,000
Current tax liability @ 30% $ 78,000

 

Provision for warranties
Date Particulars Amount Date Particulars Amount
Warranties paid $ 10,000 01-07-14 Opening balance $ -
30-06-15 Closing balance $ 20,000 Warranties expense $ 30,000
Total $ 30,000 Total $ 30,000
Prepaid insurance
Date Particulars Amount Date Particulars Amount
01-07-14 Opening balance $ - Insurance expense $ 10,000
Insurance paid $ 30,000 30-06-15 Closing balance $ 10,000
Total $ 30,000 Total $ 20,000

 

Deferred tax worksheet

30 June 2015

Carrying Amount Future Deductible Amount Tax Base Taxable Temporary Differences Deductible Temporary Differences
Assets
Plant (net) $ 320,000 $ 300,000 $ 300,000 $ 20,000
Liabilities
Provision for warranties $ 20,000 $ 20,000 $ - $ 20,000
Total Temporary Diffs $ 20,000 $ 20,000
Deferred tax liability 30% $ 6,000
Deferred tax asset 30% $ 6,000
Beginning balances $ - $ -
Increase (Decrease) for the year $ 6,000 $ 6,000

 

Workings:

Payment at inception $ 600,000
Annual payment $ 500,000
rate 12%
PVA factor 20 years 8.3658
PV of MLP $ 4,782,900

 

Answer 3

The consolidate statement of financial position is as under (Atrill & Mclaney 2006):

Consolidated Statements of financial position of Sandy Ltd as at 30 June 2015
Assets
Cash $ 120
Accounts receivable $ 100
Inventory $ 263
Goodwill $ 60
Land $ 1,000
Property, plant and equipment $ 1,770
Accumulated depreciation -$ 333
Investment in Beach Ltd $ -
Total assets $ 3,370
Liabilities $ -
Accounts payable $ 110
Dividends payable $ 150
Deferred tax liability $ 33
Loan $ 810
Shareholders' equity $ -
Share capital $ 1,000
Retained earnings $ 800
Total Liabilities and Equity $ 3,370
Reconciliation of opening and closing retained earnings
Profit after tax $ 577
Retainedearnings-30June2014 -$ 270
Goodwill written off -$ 70
Retainedearnings-30June2015 $ 237

 

Workings:

Acquisition analysis
At 30 June 2014: Amount Account
Net fair value of assets and liabilities of Beach Ltd = $ 500,000.00 Share capital
$ 200,000.00 Retained earnings
$ 70,000.00 +100,000 (1-30%)(PPE)
$ 770,000.00
Consideration transferred by SANDY Ltd $ 900,000.00 Investment in BEACH Ltd
Goodwill $ 130,000.00 Consideration>NFV-->Goodwill

 

Account Dr/Cr $ $
1. Business combination valuation entries at 30 June 2014
Acc depn - Equipment DR 270,000.00
Equipment CR 170,000.00
DTL CR 30,000.00
BCVR CR 70,000.00
(Calculate the BCVR of Equipment. BCVR=100,000*0.7)
Depn Expense (100,000/10) DR 10,000.00
Acc depn - Equipment CR 10,000.00
(Calculate the Depn Expense for the increase in carrying amount)
DTL DR 3,000.00
Income Tax Expense (10,000*0.3) CR 3,000.00
(Calculate the DTL and ITE)
2. Pre-acquisition entries as at 30 June 2015
Retained Earnings *+70,000 from goodwill DR 270,000.00
Share Capital DR 500,000.00
BCVR DR 70,000.00
Goodwill DR 60,000.00
Investment in BEACH Ltd CR 900,000.00
(Transfer the BCVR to the Pre-acquisition entries)
900,000.00 900,000.00
3. Dividend declared
Dividend Revenue DR 90,000.00
Interim dividend CR 40,000.00
Final Dividend CR 50,000.00
Dividend Payable DR 90,000.00
Dividend Provided (Res) CR 90,000.00
(Transfer Sub-company's dividend declare into group account)

Find Solution for Financial Accounting assignment by dropping us a mail at help@gradesaviours.com along with the question’s URL. Get in Contact with our experts at My Assignment Services AU and get the solution as per your specification & University requirement.

RELATED SOLUTIONS

Order Now

Request Callback

Tap to ChatGet instant assignment help

Get 500 Words FREE