Solution
Soumyadeep answered on
Jun 24 2021
Question 1
a.
. As tax depreciation is higher than the expense for depreciation, defe
ed tax liability will increase by ($8,000-$7,000)*30%=$300
As doubtful debts expense is higher than bad debts, defe
ed tax asset will increase by ($3,000-$2,000)*30%=$300
As long-service leave expense is higher than long-service leave paid, defe
ed tax asset will increase by ($4,000-0)*30%=$1,200
c.
d. At June 30,2020
Balance of defe
ed tax liability = previous balance + change= $18,000 + $300 = $18,300
Balance of defe
ed tax asset = previous balance + change = $15,000 + 1,500 = $16,500
Question 2
When Quick buck ltd took control of Eldorado Ltd., the purchase consideration was 80,000 shares * $2.40=$192,000
Quick buck Ltd is acquiring Eldorado Ltd, thus the net identifiable asset is used by subtracting the fair value of liabilities from the fair value of the assets and the liabilities, instead of the ca
ying value. Purchase consideration will be based on this fair value rather than the ca
ying value.
Goodwill = Purchase consideration - Net Identifiable asset
Journal Entries
Question 3
a.
i. Upstream
We need to calculate unrealised gross profit in inventory as on June 30, 2016 to eliminate intra entity sales.
Profit=2,000/12,000=16.67%
Therefore, remaining is 80% in 2016.
80%*12,000=9,600
To calculate unrealized profit:
16.67%*9,600=1,600
Journal entry intra entity gross profit in ending inventory
As on June 30, 2017, all of the intercompany profit has been realized through resale of the inventory. Therefore there is no need to eliminate intercompany profit.
Downstream
To calculate unrealised profit:
20% on hand i.e. 6000x20% = $1,200
Unrealised Profit = 20/120*$1,200=$200
ii. Calculation of Cost of Goods Sold that will go on the...