On 1 July 2020, Frasier Ltd acquired 20% of the voting shares of Niles Ltd for...

  
 
 
 

 

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On 1 July 2020, Frasier Ltd acquired 20% of the voting shares of Niles Ltd for $30,000, thereby gaining significant influence over the investee. On 1 July 2020, Niles Ltd's net assets were represented by: Share capital $80,000 Retained Earnings $24,000 At the time of the share purchase, Niles Ltd's inventory was recorded at a book value which was $50,000 below its fair value. The inventory still remained on hand on 30 June 2022. During the year ended 30 June 2021, the following occurred: * Niles Ltd paid a dividend of $7,000. * Niles Ltd recorded a net profit after tax of $48,000 for the year. * Niles Ltd made an upward revaluation of its plant to fair value, which resulted in an after-tax increase of $5,000 in Niles Ltd's asset revaluation reserve. During the year ended 30 June 2022, the following occurred: * Niles Ltd recorded a net loss after tax of $160,000 for the year. * Niles Ltd made a downward revaluation of a building to its fair value, which resulted in an after-tax decrease of $20,000 in Niles Ltd's asset revaluation reserve. During the year ended 30 June 2023, the following occurred: * Niles Ltd recorded a net loss after tax of $40,000 for the year. The tax rate is 30%. Required: Part (A): Provide the acquisition analysis in relation to Frasier Ltd's investment in Niles Ltd (3 marks). Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during: Part (B): the year ended 30 June 2021 (4 marks), Part (C): the year ended 30 June 2022 (2 marks), and Part (D): the year ended 30 June 2023 (2 mark). Show all calculations. Formatting requirements: In all journal entries, you must specify whether the entry is a debit or credit entry by including "Dr" or "Cr" before the account name. Credit entries must also be indented. Journal entries which do not follow these requirements will be awarded a mark of zero. Below are examples of correctly formatted journal entries: Dr Cash 1000 Cr Cash 1000 OR Dr Cash Cr Cash |1000 1000 13 3 points Question 5 Part (A) Provide the acquisition analysis in relation to Frasier Ltd's investment in Niles Ltd. 14 4 points Question 5 Part (B) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2021. 15 2 points Question 5 Part (C) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2022. 16 2 points Question 5 Part (D) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2023. On 1 July 2020, Frasier Ltd acquired 20% of the voting shares of Niles Ltd for $30,000, thereby gaining significant influence over the investee. On 1 July 2020, Niles Ltd's net assets were represented by: Share capital $80,000 Retained Earnings $24,000 At the time of the share purchase, Niles Ltd's inventory was recorded at a book value which was $50,000 below its fair value. The inventory still remained on hand on 30 June 2022. During the year ended 30 June 2021, the following occurred: * Niles Ltd paid a dividend of $7,000. * Niles Ltd recorded a net profit after tax of $48,000 for the year. * Niles Ltd made an upward revaluation of its plant to fair value, which resulted in an after-tax increase of $5,000 in Niles Ltd's asset revaluation reserve. During the year ended 30 June 2022, the following occurred: * Niles Ltd recorded a net loss after tax of $160,000 for the year. * Niles Ltd made a downward revaluation of a building to its fair value, which resulted in an after-tax decrease of $20,000 in Niles Ltd's asset revaluation reserve. During the year ended 30 June 2023, the following occurred: * Niles Ltd recorded a net loss after tax of $40,000 for the year. The tax rate is 30%. Required: Part (A): Provide the acquisition analysis in relation to Frasier Ltd's investment in Niles Ltd (3 marks). Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during: Part (B): the year ended 30 June 2021 (4 marks), Part (C): the year ended 30 June 2022 (2 marks), and Part (D): the year ended 30 June 2023 (2 mark). Show all calculations. Formatting requirements: In all journal entries, you must specify whether the entry is a debit or credit entry by including "Dr" or "Cr" before the account name. Credit entries must also be indented. Journal entries which do not follow these requirements will be awarded a mark of zero. Below are examples of correctly formatted journal entries: Dr Cash 1000 Cr Cash 1000 OR Dr Cash Cr Cash |1000 1000 13 3 points Question 5 Part (A) Provide the acquisition analysis in relation to Frasier Ltd's investment in Niles Ltd. 14 4 points Question 5 Part (B) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2021. 15 2 points Question 5 Part (C) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2022. 16 2 points Question 5 Part (D) Assume that Frasier Ltd does not prepare consolidated financial statements. Record all journal entries in the records of Frasier Ltd in relation to its investment in Niles Ltd during the year ended 30 June 2023.

Answer rating: 100% (QA)

Date Account Titles and Explanation Debit Credit 01Jul20 Investment in N Ltd 30000 ... View the full answer