MCQ

1.When Jackson Ltd acquired 100% of the share capital of Michael Ltd, the carrying amount of Michael Ltd's machinery was $60 000. The fair value of the Machinery on acquisition date was $100 000. The company tax rate was 30%. What is the amount of the business combination valuation reserve that will be recognised on consolidation?

Select one:

$28 000

$12 000

$100 000

$40 000

2.

City Ltd sold an item of machinery to its subsidiary West Ltd on 1 April 2017 for $100 000. The asset had cost City Ltd $80 000 when acquired on 1 April 2016. At that time the remaining useful life of the machinery was assessed at 6 years. The adjustment necessary on consolidation as at 30 June 2019 in relation to the sale of Machinery will result in:

Select one:

a decrease in retained earnings and a decrease in current year profit

A decrease in retained earnings and an increase in current year profit

an increase in retained earnings and a decrease in current year profit

an increase in retained earnings and an increase in current year profit