George Ltd acquired 25% interest in Whiting Ltd on 1 July 2019, for a cost of...
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George Ltd acquired 25% interest in Whiting Ltd on 1 July 2019, for a cost of $350,000, The equity of Whiting Ltd at acquisition date consisted of share capital $200,000 and retained earnings $100.000. All the identifiable net assets of Whiting Ltd at 1 July 2019 were recorded at fair values except for an item of plant with a fair value of $20,000 greater than carrying amount. The plant has a useful life of 10 years. For the year ended 30 June 2020, Whiting recorded an after tax profit of $500,000. The following inter-entity transactions occurred between George Ltd and Whiting Ltd: (a) On 1 January 2020, George Ltd sold a machine costing $204, 000 to Whiting Ltd for $222, 000. Whiting Ltd applied a depreciation rate of 10% per annum on cost to the machine. (b) On 1 July 2019, Whiting Ltd sold inventories to George Ltd for $55 000. The original cost was $40,000. George Ltd sold 20% of this inventory extemally by 30 June 2020 for $80,000. (cC) On 1 June 2019, Whiting Ltd sold inventories to George Ltd at a profit of $25,000 before tax, On 30 June 2019, this inventory remained unsold. George Ltd sold this entire inventory to external parties for $57,000 on 28 May 2020. George Ltd applies AASB 128/IAS 28 in accounting for its investment in Whiting Ltd and does not prepare consolidated financial statements. The tax rate is 30%. Required: Calculate George Ltd's share of profit for the year ended 30 June 2020. Show all workings. For the toolbar, press ALT F10 (PC) or ALT FN+F10 (Mac). George Ltd acquired 25% interest in Whiting Ltd on 1 July 2019, for a cost of $350,000, The equity of Whiting Ltd at acquisition date consisted of share capital $200,000 and retained earnings $100.000. All the identifiable net assets of Whiting Ltd at 1 July 2019 were recorded at fair values except for an item of plant with a fair value of $20,000 greater than carrying amount. The plant has a useful life of 10 years. For the year ended 30 June 2020, Whiting recorded an after tax profit of $500,000. The following inter-entity transactions occurred between George Ltd and Whiting Ltd: (a) On 1 January 2020, George Ltd sold a machine costing $204, 000 to Whiting Ltd for $222, 000. Whiting Ltd applied a depreciation rate of 10% per annum on cost to the machine. (b) On 1 July 2019, Whiting Ltd sold inventories to George Ltd for $55 000. The original cost was $40,000. George Ltd sold 20% of this inventory extemally by 30 June 2020 for $80,000. (cC) On 1 June 2019, Whiting Ltd sold inventories to George Ltd at a profit of $25,000 before tax, On 30 June 2019, this inventory remained unsold. George Ltd sold this entire inventory to external parties for $57,000 on 28 May 2020. George Ltd applies AASB 128/IAS 28 in accounting for its investment in Whiting Ltd and does not prepare consolidated financial statements. The tax rate is 30%. Required: Calculate George Ltd's share of profit for the year ended 30 June 2020. Show all workings. For the toolbar, press ALT F10 (PC) or ALT FN+F10 (Mac).
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The Share of George Ltd to Whiting Ltds Net income is computed as follows Before ta... View the full answer
Related Book For
Accounting
ISBN: 978-1285743615
26th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
Posted Date:
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