BAO2203 Corporate Accounting
Questions:
Corporate accounting - Assessed Coursework 4
On 1 July 2019 Tina Ltd acquired a 35% interest in Tom Ltd for consideration of $120,000. At that date the equity of Tom Ltd consisted of:
Share Capital 240,000
Retained Earnings 84,000
Asset Revaluation Surplus 36,000
360,000
All assets and liabilities of Tom Ltd are recorded at fair value except for inventory which was recorded at $9,600 below its fair value. This entire inventory was sold to external parties in January 2020.
The following amounts represent the profit/(loss), dividends paid and asset revaluation surplus (ARS) balance by Tom Ltd since acquisition:
Year ending 30/6/2021
Year ending 30/6/2020
Profit /(Loss) after tax 36,000 (24,000)
Dividend paid 9,600 7,200
ARS Balance 52,800 43,200
On 1 Oct 2019, Tom Ltd sold an item of equipment to Tina Ltd for $38,400. The equipment originally cost Tom Ltd $45,600 and had a carrying amount at the time of sale of $27,600. Both companies apply a 20% straight-line method of depreciation. The tax rate is 30%.
Required:
a)Prepare the equity accounting journals to account for the Investment in Tom Ltd in accordance with AASB 128 as of 30 June 2021. Assume Tina Ltd prepares consolidated financial statements and show all workings. (8 marks)
b)Calculate the carrying amount of the Investment in Tom Ltd disclosed in the consolidated financial statements as of 30 June 2021. Show your workings. (2 marks)
The paper should not be less than 2500 words and no longer than 4,000 words. Assignments that are less than 2,500 and exceed 4,000 words will be penalised. - You must use Times New Roman, 12 point font size, double spacing. - The paper must be completed in groups of 3 students. - The paper is expected to be properly researched and prepared. The paper should include a reference list identifying the sources used. - In preparing the paper, emphasis should be placed on: o Proper identification of issues, logical arguments and depth of analysis o Linkage of literature with discussion o Coherent structure, systematic presentation and clarity of expression
