Question
Walters Ltd owns 35% of the shares of its associate, Bellamy Ltd. At the acquisition date, there were no differences between the fair values and
Walters Ltd owns 35% of the shares of its associate, Bellamy Ltd. At the acquisition date, there were no differences between the fair values and the carrying amounts of the identifiable assets and liabilities of Bellamy Ltd.
For the year ended 30 June 2020, Bellamy Ltd recorded a profit after tax of $375,000. The tax rate is 30%.
The following transactions have occurred between Walters Ltd and Bellamy Ltd.
- On 1 July 2019, Walters Ltd sold a non-current asset costing $40,000 to Bellamy Ltd for $48,000. Bellamy Ltd depreciates the asset using the straight-line method over 5 years;
- On 1 January 2019, Walters Ltd sold an item of plant to Bellamy Ltd for $34,000. The carrying amount of the asset to Walters Ltd at time of sale was $22,000. Bellamy Ltd applies a 25% p.a. straight-line method of depreciation;
- The beginning inventory of Walters Ltd included inventories worth $8,000 which were purchased from Bellamy Ltd in the previous year. The inventories originally cost Bellamy Ltd $6,400;
- The closing inventory of Bellamy Ltd included inventories purchased from Walters Ltd at a before tax profit of $7,200.
Walters Ltd applies the equity method in accounting for its investment in Bellamy Ltd. Furthermore, Walters Ltd does not prepare consolidated financial statements.
Required:
(a) In the table below, calculate Walters Ltds share of Bellamy Ltds profit after tax for the year ended 30 June 2020 (Calculations/workings must be included);
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