(A)

Why are adjustments for some intragroup transactions necessary in the calculation of the NCI share of equity?

All the remaining questions are attached in the files

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AYB340 COMPANY ACCOUNTING ORAL PRESENTATION QUESTIONS TOPIC 9 (A) Segment disclosures are widely regarded as some of the most useful disclosures in financial reports because of the extent to which they disaggregate financial information into meaningful and often revealing groupings. Choose a company and download their most recent annual report. Show the class the reportable segments, and disclosures made by the company. How does this segment information enhance the user's ability to analyse the performance of the company. Explain what the \"management approach\" used in AASB 8/IFRS 8 means. (B) Cornish Ltd is a diversified manufacturing company. Management has been presented with the following information concerning eight operating segments that have been identified. A B C D E F G H Revenue 150 50 25 25 20 15 10 5 Profits 38 5 7 2 3 100 50 Losses Assets 6 (4) 750 500 100 150 (7) 300 50 Cornish Ltd has no unallocated revenue. Required Determine with the classes help, the reportable segments of Cornish Ltd. (Note: You might like to use excel to do this). (C) In its 2017 annual report (note 19) Wesfarmers lists its overseas subsidiaries and their functional currencies. These include Bunnings (NZ) Ltd for which the functional currency is the New Zealand dollar (NZD), and KAS Global Trading Pty Ltd for which the functional currency is the Hong Kong dollar (HK$). Required What is meant by 'functional currency'? How is it determined? Discuss the translation process that will occur so that these subsidiaries can be included in the consolidated financial statements of Wesfarmers Ltd. Topic 10 - Presentation Questions (A) What is an associate entity? Detailed below is the group structure of the A Ltd group. Determine the relationship of A Ltd to B Ltd, C Ltd and D Ltd and the accounting method for these investments. In your discussion, indicate what factors need to be considered in making your decision. 60% A Ltd 9% 10% 25% B Ltd C Ltd D Ltd (B) Using the information below highlight and explain the differences in application of the equity method of accounting where the method is applied in the records of the investor compared with the application in the consolidation worksheet of the investor. Bromley Ltd acquired a 20% interest in Coverley Ltd for $150000 cash on 1 July 2016. The directors of Bromley Ltd believe this investment represents significant influence over the investee. The equity of Coverley Ltd at the acquisition date was: AYB340 Page 1 of 2 All the identifiable assets and liabilities of Coverley Ltd were recorded at fair value. Profits and dividends for the years ended 30 June 2017 to 2018 were as follows: 2017 2018 1. 2. 3. Profit before tax 160 000 120 000 Income tax expense 20 000 30 000 Dividend Paid 50 000 50 000 Dividend Declared 20 000 - Prepare journal entries in the records of Bromley Ltd for each of the years ended 30 June 2017 to 2018 in relation to its investment in the associate, Coverley Ltd. (Assume Bromley Ltd does not prepare consolidated financial statements.) Prepare the consolidation worksheet entries to account for Bromley Ltd's interest in their associate, Coverley Ltd. (Assume Bromley Ltd does prepare consolidated financial statements.) Calculate the carrying amount of the investment in Coverley Ltd at 30 June 2018. (C) Halem Ltd acquired a 30% interest in Morow Ltd for $200 000 on the 1 July, 2017. Halem Ltd accounts for this investment as an associate. At acquisition date, there is a fair value difference of $20 000 for some depreciable non-current assets of Morow Ltd's. These depreciable assets are expected to have a further 10 year life. There is no goodwill or gain on bargain purchase. Profit after tax for Morow Ltd after the first year is $80 000. In this first year, Halem Ltd sold inventory to Morow Ltd and recorded a before profit of $20 000. At 30 June 2018, the inventory is unsold by Morow Ltd. In addition, Morow Ltd sold machinery to Halem Ltd for $50 000 on 1 July, 2017. The machinery had a carrying amount in Morow Ltd accounts of $42 000. Halem applies 20% pa straight-line depreciation method. With the assistance of the class, discuss in detail the calculation of Halem Ltd's share of profit for 30 June, 2018. AYB340 Page 2 of 2 Topic 8 - Presentation Questions (A) Why are adjustments for some intragroup transactions necessary in the calculation of the NCI share of equity? Mayton Ltd owns 90% of the share capital of Onwards Ltd. In January 2017, Mayton Ltd sells inventory to Onwards Ltd for $50 000 cash. This inventory had previously cost Mayton Ltd $42 000, and remains unsold by Onwards Ltd at the end of the period. The income tax rate is 30%. A junior accountant working for Mayton Ltd recorded the following consolidation adjustment for 30 June 2017: Sales revenue Cost of sales Inventories Dr Cr Cr 50 000 Deferred tax asset Income tax expense Dr Cr 2 400 NCI Dr Cr 560 NCI share of profit/loss 42 000 8 000 2 400 560 Discuss with the class whether the entries are correct. (B) Leo Ltd owns 90% of the share capital of Command Ltd. On 1 January 2017, Command Ltd sold machinery to Leo Ltd for $80 000 cash. This machinery was carried at $65 000 in the records of Command Ltd at the time of sale. Leo depreciates the machinery using 10% straight-line method. The income tax rate is 30%. AYB340 Page 1 of 2 A junior accountant working for Leo Ltd recorded the following consolidation adjustment for 30 June 2017: Proceeds on sale of machinery CA of machinery sold Machinery Dr Cr Cr 80 000 Deferred tax asset Income tax expense Dr Cr 4 500 NCI share of profit/loss NCI Dr Cr 1 050 Accumulated depreciation Depreciation expense D Cr 1 500 Income tax expense Deferred tax asset Dr Cr 450 65 000 15 000 4 500 1 050 1 500 450 Discuss with the class whether the entries are correct and complete. (C) Quoll Ltd owns 80% of the share capital of Western Ltd. The following intragroup transactions took place during the period ended 30 June 2017: (a) Western Ltd paid $20 000 during the period ended 30 June 2017 as management fees for services provided by Quoll Ltd. (b) Western Ltd rented a spare warehouse to Quoll Ltd starting from 31 December 2016 for 1 year. The total charge for the rental was $30 000, and Quoll Ltd will pay this amount to Western Ltd at 31 December 2017. (c) During the period ended 30 June 2017, Western Ltd paid an interim dividend of $5 000 and declared a final dividend of $8 000 out of post-acquisition profits. Required In relation to the above intragroup transactions: 1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2017. 2. Explain in detail why you made each adjusting journal entry, whether there is a tax effect and if the NCI share of equity required adjustment. AYB340 Page 2 of 2