University : Macquarie University UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : ACCG8126
Country : Australia
Assignment Task:

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All inventory on hand at acquisition date was sold by 30 June 2016. The cost of the equipment was $75,000 and had a further five (5) year life as at the date of acquisition. Payne Ltd disclosed a contingent liability at the date of acquisition in relation to a claim by an employee for a salary dispute. Gasol Ltd estimated a fair value of $16,000 on the claim. This claim was settled in December 2018 for $9,000.

Additional information:

  1. During the 2017-18 financial year, Gasol Ltd purchased inventory from Payne Ltd for $18,000. The cost of inventory to Payne Ltd was $13,000. Half of this inventory was sold by Gasol Ltd to external parties by 30 June 2018. The balance was sold to external parties in October 2018.

  2. During the 2018-19 financial year, Gasol Ltd sold inventory to Payne Ltd for $28,000 at a mark-up of 40%. By 30 June 2019, Payne Ltd still held inventory that it had bought from Gasol Ltd for $8,400.

  3. On 1 January 2017, Payne Ltd sold an item of machinery to Gasol Ltd for $40,000. The original cost of the equipment to Payne Ltd was $52,000 and had a carrying amount at the time of sale of $32,000. The machinery is considered to have a further five (5) year life as at 1 January 2017.

  4. On 1 January 2019, Gasol Ltd acquired $50,000 of debentures previously issued by Payne Ltd. The debentures were acquired on the open market for $43,000. Interest on debentures is paid half-yearly. Outstanding interest has been paid by Payne Ltd on 30 June 2019.

  5. All transfers from retained earnings to the general reserve by Payne Ltd were from post-acquisition earnings.

  6. On realisation of the business combination valuation reserve, a transfer is made to retained earnings on consolidation.

  7. The tax rate is 30%

 

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  • Posted on : April 23rd, 2019
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