All identifiable assets and liabilities of Bach Ltd were recorded at fair value except for the...

 

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All identifiable assets and liabilities of Bach Ltd were recorded at fair value except for the machinery which was recorded at $15 000 below its fair value on 1 July 2020. Machinery is depreciated at 20% straight line. Information about income and changes in equity for Bach Ltd for the year ended 30 June 2021 is as follows Bach Ltd $ 260,000 120,000 140,000 28,000 112,000 86,000 198,000 15,000 40,000 55,000 143,000 Revenue Expenses Profit before income tax Income tax expense Profit for the period Retained earnings (1/7/20) Dividend paid Dividend declared Retained earnings (30/6/21) Additional information: • On 1 January 2021, Bach Ltd sold Stratic Ltd equipment for $48,000. The equipment had originally cost Bach Ltd $65,000 and had a carrying amount of $42,000 at the time of sale to Stratic Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost. • During the year ended 30 June 2021, Bach Ltd sold inventory to Stratic Ltd for $24,000. The cost of this inventory to Bach Ltd was $21,500. Half of this inventory is still on hand at the end of the year. • Stratic Ltd regards Bach Ltd as an 'associate' company. • The tax rate is 30%. Required: Prepare the journal entries required by Stratic Ltd relating to its Investment in Bach Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Stratic Ltd prepares consolidated financial statements. All identifiable assets and liabilities of Bach Ltd were recorded at fair value except for the machinery which was recorded at $15 000 below its fair value on 1 July 2020. Machinery is depreciated at 20% straight line. Information about income and changes in equity for Bach Ltd for the year ended 30 June 2021 is as follows Bach Ltd $ 260,000 120,000 140,000 28,000 112,000 86,000 198,000 15,000 40,000 55,000 143,000 Revenue Expenses Profit before income tax Income tax expense Profit for the period Retained earnings (1/7/20) Dividend paid Dividend declared Retained earnings (30/6/21) Additional information: • On 1 January 2021, Bach Ltd sold Stratic Ltd equipment for $48,000. The equipment had originally cost Bach Ltd $65,000 and had a carrying amount of $42,000 at the time of sale to Stratic Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost. • During the year ended 30 June 2021, Bach Ltd sold inventory to Stratic Ltd for $24,000. The cost of this inventory to Bach Ltd was $21,500. Half of this inventory is still on hand at the end of the year. • Stratic Ltd regards Bach Ltd as an 'associate' company. • The tax rate is 30%. Required: Prepare the journal entries required by Stratic Ltd relating to its Investment in Bach Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Stratic Ltd prepares consolidated financial statements.

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