16. On 1 January 2020, Big Ltd acquired all the issued shares (non cum. div.) of small Ltd for $750 000. At that date, the equity of small Ltd was recorded at:

Share capital $350,000

Reserves 150,000

Retained earnings 100 000

On 1 January 2020, the records of small Ltd also showed that the carrying value of the land is $40,000 with a fair value of $50,000 . Further small Ltd had a dividend payable of $5 000, the dividend to be paid in March 2020. All other assets and liabilities except land were carried at amounts equal to their fair values. Applicable tax rate of 30%.

The Pre-acquisition entry for the year ended 30/06/2021:

Select one:

a. Dr Shares in Kent $750,000, Dr Dividend receivable $5,000, Cr Share capital $350,000, Cr Reserves $150,000, Dr Retained earnings $100,000, Cr BCVR $145,000, Cr Dividend payable $5,000

b. Dr Share capital $350,000, Dr Reserves $150,000, Dr Retained earnings $100,000, Dr BCVR $150,000, Dr Dividend payable $5,000, Cr Dividend receivable $5,000, Cr Shares in Kent $750,000

c. Dr Share capital $350,000, Dr Reserves $150,000, Dr Retained earnings $100,000, Dr BCVR $150,000, Cr Shares in Kent $750,000

d. Dr Share capital $350,000, Dr Reserves $150,000, Dr Retained earnings $100,000, Dr Goodwill $150,000, Dr Dividend payable $5,000, Cr Shares in Kent $750,000, Cr Dividend receivable $5,000

17. Head Ltd owns all of the shares of Bill Ltd. In relation to the following intergroup transaction, select the correct consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2020. Assume an income tax rate of 30%. Head Ltd sold inventory to Bill Ltd on 1 September 2019 for $80 000, the inventory costs Head Ltd $40 000. One fourth of the inventory was sold by Bill Ltd to GAP Ltd

Select one:

a. Dr Cost of sales $50,000, Dr Inventory $30,000, Cr Sales revenue 80,000, No tax effects.

b. Dr Cost of sales $50,000, Dr Inventory $30,000, Cr Sales revenue 80,000, Dr Income tax expenses $9,000, Cr Deferred tax asset $9,000

c. Dr Cost of sales $50,000, Dr Inventory $30,000, Cr Sales revenue 80,000, Dr Deferred tax asset $9,000, Cr Income tax expenses $9,000

d. Dr Sales revenue 80,000, Cr Cost of sales $50,000, Cr Inventory $30,000, Dr Deferred tax asset $9,000, Cr Income tax expenses $9,000