1. Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to have a useful life of 5 years (straight-line basis) and no residual value. For taxation purposes, the ATO allows the company to depreciate
the asset over 4 years. The profit before tax for the company for the year ending 30
June 2017 is $600,000. To calculate this profit the company has deducted $60,000
entertainment expense, and $80,000 salary expense that has not yet been paid.
Also the company has included $70,000 interest as income that the company has
not yet received. The tax rate is 30%.
(a) Calculate the company’s taxable profit and hence its tax payable for 2017.
(b) Determine the deferred tax liability and/or deferred tax asset that will result.
(c) Prepare the necessary journal entries on 30 June 2017.
2. The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000
cash and 800,000 shares each valued at $1.50. The summary statement of the
financial position of the subsidiary company immediately following the acquisition
Fair value of assets acquired $2,640,000
Fair value of liabilities acquired $720,000
Total shareholders’ equity of the subsidiary company $800,000
Retained earnings of the subsidiary company $1,120,000
(a) Pass the necessary journal entry to record the acquisition
(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition
(c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company
(d) Determine the 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
3. Aqua Ltd issues a prospectus inviting the public to subscribe for 30 million
ordinary shares of $2.00 each. The terms of the issue are that $1.00 is to be
paid on application and the remaining $1.00 within one month of allotment.
Applications are received for 36 million shares during July 2019. The directors
allot 30 million shares on 15 August 2019. The shares were allotted on a first-
come, first-serve basis. The directors refunded the application money for 6
million shares on 15 August 2019. The amounts payable on the allotment are
due by 20 September 2019. By 20 September 2019, the holders of 5 million
shares have failed to pay the amounts due on allotment. The directors forfeit the
shares on 30 September 2019. The shares are resold on 15 October 2019 as
fully paid. An amount of $1.90 per share is received. The remaining balance of
forfeited shares were refunded on 20 October 2019.
Provide the journal entries necessary to account for the above transactions
a) Where the parent company does not hold 100 percent equity of the subsidiary
company, what portion of the intra-group transactions between the parent
entity and the subsidiary entity will need to be eliminated on consolidation?
b) What is a non-controlling interest, and how should it be disclosed?
c) How are non-controlling interests affected by intra-group transactions?
d) What are the three steps we use to calculate total non-controlling interest?
5.a) Jessica Ltd sold inventory during the current period to its wholly owned
subsidiary, Amelie Ltd, for $15 000. These items previously cost Jessica
Ltd $12 000. Amelie Ltd subsequently sold half the items to Ningbo Ltd for
$8000. The tax rate is 30%. The group accountant for Jessica Ltd, Li Chen,
maintains that the appropriate consolidation adjustment entries are as