> Sovereign Investments Ltd purchased 100% of Agent International Trading Ltd for $2,400,000 on 01/07/2020. >At...
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> Sovereign Investments Ltd purchased 100% of Agent International Trading Ltd for $2,400,000 on 01/07/2020. >At the date of aquisition, the books of Agent showed: Share capital: $1,400,000 General reserve: $452,000 Retained earnings: $49,000 TOTAL EQUITY: $2,301,000 ➤ At date of acquisition, all identifiable net assets of Agent were recorded at fair value, with the exception of a block of land. The land had a carrying value of $970,000 but a fair value of $1,040,000 ➤ Over the 2022 financial year, Agent paid Sovereign $67,200 in management fees. Sovereign booked this income to 'Service revenue'. > Sovereign invested a further $400,000 in Loan in Agent. Interest was paid at an annual rate of 13%. All interest has been fully paid/received during the financial year. > Sovereign holds no investments in equities, other than their investment in Agent International Trading Ltd. Both companies use accrual accounting when recognising interest and dividends (both paid and received). ➤ The board of directors at Sovereign declared an interim dividend of $146,500 on 20 Dec 2021 and was paid 28 days later. Final dividends for Sovereign of $244,200 was declared on 25 June 2022, and paid 28 days following. ➤ The board of directors at Agent declared an interim dividend of $49,550 on 20 Dec 2021 and was paid 30 days later. Final dividend for Agent of $66,100 was declared on 20 June 2022, and paid 28 days following. > Over the financial year, Agent purchased $1,730,000 of inventory from Sovereign, which had originally cost them $930,000. By 30 June 2022, only 65% remained on hand. > On 01/07/2020, Sovereign sold a machine to Agent for $447,000. The original cost of the asset was $1,450,000, and at the time of the sale accumulated depreciation was $892,000. > The machine was estimated to have a useful remaining life of 6 years and nil residual value. Both companies use straight line depreciation. ➤ The company tax rate is 30%. Assume all sales are made on credit. Ignore franking credits, GST and Superannuation. ➤ Both companies are in a similar industry and use the financial year ending 30 June. The majority of income arises from the wholesale of products with a minority of service fee revenue. > Sovereign Investments Ltd purchased 100% of Agent International Trading Ltd for $2,400,000 on 01/07/2020. >At the date of aquisition, the books of Agent showed: Share capital: $1,400,000 General reserve: $452,000 Retained earnings: $49,000 TOTAL EQUITY: $2,301,000 ➤ At date of acquisition, all identifiable net assets of Agent were recorded at fair value, with the exception of a block of land. The land had a carrying value of $970,000 but a fair value of $1,040,000 ➤ Over the 2022 financial year, Agent paid Sovereign $67,200 in management fees. Sovereign booked this income to 'Service revenue'. > Sovereign invested a further $400,000 in Loan in Agent. Interest was paid at an annual rate of 13%. All interest has been fully paid/received during the financial year. > Sovereign holds no investments in equities, other than their investment in Agent International Trading Ltd. Both companies use accrual accounting when recognising interest and dividends (both paid and received). ➤ The board of directors at Sovereign declared an interim dividend of $146,500 on 20 Dec 2021 and was paid 28 days later. Final dividends for Sovereign of $244,200 was declared on 25 June 2022, and paid 28 days following. ➤ The board of directors at Agent declared an interim dividend of $49,550 on 20 Dec 2021 and was paid 30 days later. Final dividend for Agent of $66,100 was declared on 20 June 2022, and paid 28 days following. > Over the financial year, Agent purchased $1,730,000 of inventory from Sovereign, which had originally cost them $930,000. By 30 June 2022, only 65% remained on hand. > On 01/07/2020, Sovereign sold a machine to Agent for $447,000. The original cost of the asset was $1,450,000, and at the time of the sale accumulated depreciation was $892,000. > The machine was estimated to have a useful remaining life of 6 years and nil residual value. Both companies use straight line depreciation. ➤ The company tax rate is 30%. Assume all sales are made on credit. Ignore franking credits, GST and Superannuation. ➤ Both companies are in a similar industry and use the financial year ending 30 June. The majority of income arises from the wholesale of products with a minority of service fee revenue.
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Answer rating: 100% (QA)
Journal Entries in the Books of Agent Particulars Debit Credit Naration Bank Ac Dr To Soverign 2400000 2400000 Purchase Consideration Paid SoverignAc ... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
Posted Date:
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