Sea Ltd acquired 25% interest in Saw Ltd on 1 July 2019. All identifiable net assets of Saw Ltd were recorded at fair values except for an item of plant with a fair value of $40,000 greater than carrying amount.

The plant has a useful life of 10 years, using a straight-line depreciation method. 

For the year ended 30 June 2022, Saw Ltd recorded an after-tax profit of $450,000 and paid an interim dividend of $30,000 on 1 September 2021. 

The following inter-entity transactions occurred between the two entities: 

(a) On 1 July 2021, Sea Ltd sold a machine costing $304, 000 to Saw Ltd for $322, 000. Saw Ltd applied a depreciation rate of 10% per annum on cost to the machine. 

(b) On 30 April 2022, Saw Ltd sold inventories to Sea Ltd for an after tax profit of $3,500. Sea Ltd sold 20% of this inventory externally by 30 June 2022 for $80,000. 

(c) On 30 June 2022, Saw Ltd declared a dividend of $10,000. Sea Ltd applies AASB 128/IAS 28 in accounting for its investment in Saw Ltd and does not prepare consolidated financial statements. The tax rate is 30%. 

 

Required: 

a) Calculate Sea Ltd's share of profit for the year ended 30 June 2022. Show all workings?

b) Complete all entries for the year ended 30 June 2022. Ignore narrations?