The Accounting Standard AASB 3 Business Combinations states that its objective of having this accounting standard is to improve the relevance, reliability, and comparability of the information that an entity provides in its financial statements about a business combination. (jttps://www.aasb.gov.au/admin/file/content105/c9/AASB3_08-15_COMPjun20_01- 22.pdf). Several accounting standards assist in it. One of them is the AASB 112 Income Taxes accounting standard, which prescribes the accounting treatment for income taxes, including how to account for current and future taxes. Recognising deferred taxes and liabilities affects the amount of goodwill arising from business combinations or the amount of bargain purchase gain recognized on financial statements. (https://www.aasb.gov.au/admin/file/content105/c9/AASB112_08- 15_COMPfeb2018_01-19.pdf)

Assessment Task

You are provided with three questions to answer.

The Marking criterion is provided separately. As it explains, you must provide a detailed explanation of how you arrived at the answers.

Question 1. 20 Marks

Rawson Traders Ltd commenced operations on the 1st of July 2023. He presented its first statement of profit and loss, other comprehensive income, and the first statement of position on the 30th of June 2024. The statements are prepared before considering taxation. The following information is available.

Statement of profit and loss and other comprehensive income for the year ended 30th of June 2024.

Revenue Cost of sales $ 1,500,000 770,000 730,000 Gross profit Expenses: Administrative expenses 80,000 Salaries 200,000 Long-Service Leave 20,000 Warranty expenses 30,000 Depreciation expense of Plant 60,000 Insurance 20,000 Total expenses 410,000 Accounting profit before tax 320,000