4 Multiple choice questions

4 multiple choice questions Question 1 Henry Ltd. is a highly successful company producing cat food using high quality Australian fish, and exports most of its products to the United States. During its most recent reporting period ended on 30 June 2021 the cost of premium Australian rock lobsters collapsed Henry is developing a new type of extra premium cat food using rock lobster. The following notes record events relating to the project October 2020: Price of rock lobsters collapses, Henry purchases $50,000 worth and starts developing a new recipe. November 2020: taste testing using the new product, 4 out of 5 cats like the new food. The new recipe is highly costly as lots of lobster is needed. This cost $15,000. December 2020: Improved the recipe to reduce the amount of lobster used. The existing machines can be used to produce the new product. January 2021: Market research (cost: $25,000) showed American buyers are willing to pay premium prices for the product. Henry Ltd. American importer is highly interested in purchasing large volumes. February 2021: The marketing team finalizes the design of the box the cans will be shipped in for a total cost of $25,000. March 2021: Henry Ltd. purchases a new machine to ramp up production which cost $125,000. At what point can Henry capitalize the expenses related to the development of the new product? At which point can Henry capitalise the expenses related to the development of the new product? a. January 2021 b. October 2020 December 2020 d. February 2021 e. November 2020 C. Question 2 Randwick Holdings is the parent of Eastgardens Ltd, Greensquare Ltd and Bondi Ltd. On 3 June 2022, Eastgardens Ltd sold a batch of inventories to Greensquare Ltd for $21 million. These inventories originally cost Eastgardens Ltd $18 million. On 7 June 2022, Greensquare Ltd sold these inventories to Bondi Ltd for $24 million. On 28 June 2022, Bondi Ltd sold the same inventories to Randwick Holdings for $30 million. As of 30 June 2022, 100% of these inventories remains in Randwick Holdings. What is the unrealized profit from intragroup transfer of inventories for the Randwick Holdings group during the fiscal year ended 30 June 2022? What is the unrealised profit from the intergroup transfer of inventories for Randwick Holdings group during the financial year 30 June 2020 ? a. 6 Million b. 9 Million c. 12 Million d. 5 Million e. 4.5 Million Question 3 During the fiscal year ended 30 June 2021 Henry Ltd. made the following changes: 1. The provision for bad debts will now be 5% of outstanding accounts receivables instead of 3% based on last years' write offs for bad debts. II. Buildings will now be held at fair value under the revaluation model rather than at historical cost. III. Due to rapid technological developments the useful life of Henry Ltdos equipment is now estimated to be another 3 years instead of 5. IV. The equipment will now be depreciated using the diminishing balance method, rather than the straight line method. Henry Ltd. should account for these changes in the following way: Classify each one as retrospective or prospective Question 4 On 1 January 2022, Wacken Limited acquired all the issued shares in Latitude Limited. At that date, the land of Latitude Limited had a fair value of $30 000 more than its carrying amount in Latitude Limited's financial statements. It was sold for $150,000 cash and Latitude Limited will record a gain on sale of $50,000. The land was sold to external parties on 31 December 2023. The tax rate is 30%. The business combination valuation entries in relation to Latitude Limited's sale of land for the year ending 30 June 2024 will include: a. None of the other options. O b. Dr Loss on Sale Cr Income Tax Expense Cr Transfer from BCVR OC. Dr Gain on Sale Cr Income Tax Expense Cr Transfer from BCVR O d. Dr Cash Cr Land Cr Gain on Sale e. Dr Gain on Sale Cr Income Tax Expense $ 30,000 $ 9000 $ 21,000 $ 30,000 $ 9000 $ 21,000 $ 150,000 $ 100,000 $ 50,000 $ 50,000 $ 15,000