Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 4 (20 marks) Accounting for a joint venture On 1 July 2040, Esperance Ltd purchased 50% of the shares of Albany Ltd for $375,000,

image text in transcribed

image text in transcribed

Question 4 (20 marks) Accounting for a joint venture On 1 July 2040, Esperance Ltd purchased 50% of the shares of Albany Ltd for $375,000, which is now operated as a joint venture. This shareholding gave Esperance joint control of the operations of Albany Ltd. At that date, equity of Albany Ltd consisted of: $ Share capital 336,000 Asset revaluation surplus 48,000 Retained earnings 240,000 At the date of acquisition, all assets and liabilities of Albany Ltd were deemed to be at their fair values, except for Inventory (carrying amount $290,000 and fair value of $330,000) and for Plant (carrying amount $480,000 and fair value of $624,000). For the year ended 30 June 2041, Albany Ltd recorded an after-tax profit of $302,400 and declared the final dividend of $115,000. An interim dividend of $58,000 was paid on 31 December 2040 As at 30 June 2041, the Shareholders' funds section of the Statement of Financial Position of Albany Ltd showed the following: Share capital Asset revaluation surplus Retained earnings $ 336,000 72,000 369,400 Additional Information Albany Ltd sold the inventory on hand at the date of acquisition by 31 December 2040 The plant asset of Albany Ltd has a remaining useful life of five (5) years The land asset was revalued by Albany Ltd during the current financial asset. On 15 June 2041, Esperance Ltd sold inventory to Albany Ltd for $24,000. The inventory had a cost of $21,600. The inventory was still on hand at year end. On 20 May 2041, Albany Ltd sold inventory to Esperance Ltd for $13,200. The inventory had a cost of $9,600. Sixty percent (60%) of the inventory was still on hand at year end. On 20 May 2041, Albany Ltd sold inventory to Esperance Ltd for $13,200. The inventory had a cost of $9,600. Sixty percent (60%) of the inventory was still on hand at year end. On 1 April 2041, Esperance Ltd sold equipment to Albany Ltd for $875,000. Esperance Ltd recorded a profit before tax of $86,400 on this sale. This equipment has remaining useful life of ten (10) years, with benefits expected to occur evenly in these years. The tax rate is 30%. Esperance Ltd is a parent entity and prepares consolidated accounts and recognises dividends as income when received. Required: (a) Prepare a table to show the acquisition analysis of Albany at 1 July 2040; clearly show any supporting calculations. (6 marks) (b) Calculate the investor's share of the profit of the joint venture for the year ended 30 June 2041. (9 marks) (c) Prepare the consolidation worksheet entries for Esperance Ltd in relation to its investment in Albany Ltd for the year ended 30 June 2041. (5 marks) Question 4 (20 marks) Accounting for a joint venture On 1 July 2040, Esperance Ltd purchased 50% of the shares of Albany Ltd for $375,000, which is now operated as a joint venture. This shareholding gave Esperance joint control of the operations of Albany Ltd. At that date, equity of Albany Ltd consisted of: $ Share capital 336,000 Asset revaluation surplus 48,000 Retained earnings 240,000 At the date of acquisition, all assets and liabilities of Albany Ltd were deemed to be at their fair values, except for Inventory (carrying amount $290,000 and fair value of $330,000) and for Plant (carrying amount $480,000 and fair value of $624,000). For the year ended 30 June 2041, Albany Ltd recorded an after-tax profit of $302,400 and declared the final dividend of $115,000. An interim dividend of $58,000 was paid on 31 December 2040 As at 30 June 2041, the Shareholders' funds section of the Statement of Financial Position of Albany Ltd showed the following: Share capital Asset revaluation surplus Retained earnings $ 336,000 72,000 369,400 Additional Information Albany Ltd sold the inventory on hand at the date of acquisition by 31 December 2040 The plant asset of Albany Ltd has a remaining useful life of five (5) years The land asset was revalued by Albany Ltd during the current financial asset. On 15 June 2041, Esperance Ltd sold inventory to Albany Ltd for $24,000. The inventory had a cost of $21,600. The inventory was still on hand at year end. On 20 May 2041, Albany Ltd sold inventory to Esperance Ltd for $13,200. The inventory had a cost of $9,600. Sixty percent (60%) of the inventory was still on hand at year end. On 20 May 2041, Albany Ltd sold inventory to Esperance Ltd for $13,200. The inventory had a cost of $9,600. Sixty percent (60%) of the inventory was still on hand at year end. On 1 April 2041, Esperance Ltd sold equipment to Albany Ltd for $875,000. Esperance Ltd recorded a profit before tax of $86,400 on this sale. This equipment has remaining useful life of ten (10) years, with benefits expected to occur evenly in these years. The tax rate is 30%. Esperance Ltd is a parent entity and prepares consolidated accounts and recognises dividends as income when received. Required: (a) Prepare a table to show the acquisition analysis of Albany at 1 July 2040; clearly show any supporting calculations. (6 marks) (b) Calculate the investor's share of the profit of the joint venture for the year ended 30 June 2041. (9 marks) (c) Prepare the consolidation worksheet entries for Esperance Ltd in relation to its investment in Albany Ltd for the year ended 30 June 2041

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting Principles And Applications

Authors: Horace R. Brock

5th Edition

0070081522, 978-0070081529

More Books

Students also viewed these Accounting questions