Taxation and Share Acquisition Analysis
SEMI FINAL ASSESSMENT Unit Details Name Code Trimester, Year Corporate Accounting HI5020 Trimester 1, 2023 Assessment Details Name Due Date Due Time Weight Final Assessment 15 August, 2023 12.00 pm 70% Student Number First Name Family Name INSTRUCTIONS Duration • 6 hours LATE SUBMISSIONS ARE NOT ACCEPTED Answers • All responses must be entered using the answer boxes provided in this paper. DO NOT CUT AND PASTE INTO A NEW DOCUMENT File Format • MS Word only. No other format is accepted Submission Information • Instructions are listed at the end of this paper and must be followed. Academic Integrity Information • Capella Univeristy is committed to ensuring and upholding academic integrity. All assessments must comply with academic integrity guidelines. Important academic integrity breaches include plagiarism, collusion, copying, impersonation, contract cheating, data fabrication and falsification. Violating academic integrity is serious and punishable by penalties that range from deduction of marks, failure of the assessment task or unit involved, suspension of course enrolment, or cancellation of course enrolment. Penalties • Reference sources must be cited in the text of the assessment, and listed appropriately at the end in a reference list using Holmes Institute Adapted Harvard Referencing. Penalties are associated with incorrect citation and referencing. Question 1 (10 marks) KB Ltd purchased a machine on 1 July 2014 for $320,000. The machine is expected to have a useful life of 4 years (straight-line basis) and no residual value. The ATO allows the company to depreciate the asset over 5 years for taxation purposes. The profit before tax for the company for the year ending 30 June 2015 is $500,000. The tax rate is 30%. Required: a) Calculate the company’s taxable profit and hence its tax payable for 2015. (3 marks) ANSWER a: (answer box will enlarge as you enter your response) b) Determine the deferred tax liability or deferred tax asset that will result. (3 marks) ANSWER b: c) Prepare the necessary journal entries on 30 June 2015. ANSWER: (4 marks) Question 2 (10 marks) Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. • During the 2020–21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: a) Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers. (5 marks) ANSWER a: b) Compute the cost of goods sold to be reported in the consolidated income statement for 2021 relating to this intra-group sale. (5 marks) ANSWER b: Question 3 (10 marks) Mammoth Ltd acquired 80 percent share capital of Tinny Ltd. On 1 July 2021, for a cost of $1600000. As at the date of acquisition, all assets and liabilities of Tinny Ltd were fairly valued except land that has a carrying value of $150000 less than the fair value. The recorded balance of equity of Tinny Ltd as of 1 July 2021 was as: Share capital $800000 Retained earnings $200000 Revaluation surplus $400000 ……………….. Total $1400000 Additional information: • The management of Mammoth Ltd values non-controlling interest following the net method. • Tinny Ltd has a profit after tax of $200000 for the year ended 30 June 2022. • During the financial year to 30 June 2022, Tinny Ltd sold inventory to Mammoth Ltd for $120000. The inventory costs Tinny Ltd $60000 to produce. 25 percent of the inventory is still in Mammoth Ltd’s hand as of 30 June 2022. • During the year, Tinny Ltd paid Mammoth Ltd $60000 in management fees. • The tax rate is 30 percent. Required: a) Based on the above information, calculate the non-controlling interest as at 30 June 2022. (6 marks) ANSWER a: b) Pass necessary journal entries to recognise the non-controlling interest as of 30 June 2022. (4 marks) ANSWER b: Question 4 Company A has two subsidiaries, S1 and S2, and two associates, AS1 and AS2. Company A has ownership interests in the subsidiaries and associates as follows: S1 100 Percent Owned (10 marks) S2 AS1 AS2 70 Percent Owned 30 Percent Owned 20 Percent Owned The following inter-entity transaction took place: AS1 sold goods to S1 at a profit of $20000. 60 percent of this profit is unrealised by the end of the year. AS1 sold goods to S2 at a profit of $20000. 60 percent of this profit is unrealised by the end of the year. AS1 sold goods to AS2 at a profit of $20000. 60 percent of this profit is unrealised by the end of the year. AS1 sold goods to Company A at a profit of $20000. 60 percent of this profit is unrealised by the end of the year. Required: In determining the investor’s share of the associates’ profits, what adjustments would be necessary as a result of these transactions? (Consider each of these transactions as independent, and ignore taxes). (2.5*4 = 10 Marks) ANSWER: (10 marks) (a) Why do we need to translate the financial statement of foreign operations? (2.5 marks) ANSWER a: (b) Explain the concepts of local currency, functional currency and presentation currency with example. (2.5 marks) ANSWER b: (c) How is the profit or loss from translating foreign operations’ financial statements from local currency to functional currency treated? (2.5 marks) ANSWER c: (d) How are the profit and loss from translating foreign operations’ financial statements from functional currency to presentation currency treated? (2.5 marks) ANSWER d: . END OF FINAL ASSESSMENT Please complete the following details: Integrity Declaration I have read and understand academic integrity policies and practices and my assessment does not violate these. Student Number Full Name Submission Date Submission instructions: Before you submit your assessment, please check the following: • You have entered your Student Number and name on the first page • You have signed the submission declaration • You have named your file with your Student Number and Unit Code e.g. GWA1995-HI5020 It is critical you follow this file name instruction to ensure the file belongs to you. • You have saved your file in MICROSOFT WORD format only. No other format is accepted. • You have checked you are submitting the correct document as special consideration is not granted if you make a mistake. Once you have checked the above: Upload your file to the appropriate link on Blackboard. You have two attempts to submit your assessment with only the final submission being marked. ** Note: All submissions are automatically passed through SafeAssign to assess academic integrity.
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
