Deck 19: Acquisition Method Application After Control Date

Question 1

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $850 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits and recorded a goodwill impairment of $10 000.
Which of the following is the correct set of consolidation entries for June 30 20X4?

A) $\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\ \text { Dr. Reserves } & 100000 & \\ \text { Dr. Retained profits } & 150000 & \\ \text { Dr. Goodwill } & 100000 & \\ \text { Cr. Investment } & & \$ 850000 \end{array}$
Dr Impairment expense
- Goodwill $\quad \$ 10000$
Cr. Accumulated goodwill impairment $\quad \$ 10000$
B) $\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\ \text { Dr. Reserves } & 100000 & \\ \text { Dr. Retained profits } & 225000 & \\ \text { Dr. Goodwill } & 25000 & \\ \text { Cr. Investment } & & \$ 850000 \end{array}$
Dr Impairment expense
- Goodwill $\quad \$ 10000$
$\begin{array} { l l } \text { Cr. Accumulated goodwill impairment } & \$ 10000 \end{array}$
C) $\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 140000 & \\\text { Dr. Goodwill } & 110000 & \\\text { Cr. Investment } & & \$ 850000\end{array}$
D)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 150000 & \\\text { Dr. Goodwill } & 90000 & \\\text { Cr. Investment } & & \$ 840000\end{array}$

Answer 1

$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\ \text { Dr. Reserves } & 100000 & \\ \text { Dr. Retained profits } & 150000 & \\ \text { Dr. Goodwill } & 100000 & \\ \text { Cr. Investment } & & \$ 850000 \end{array}$
Dr Impairment expense
- Goodwill $\quad \$ 10000$
Cr. Accumulated goodwill impairment $\quad \$ 10000$

Question 2

Judith Ltd.took control of Athol Ltd on 1 January 20X5.Athol does not depreciate buildings but Judith group does.The building is shown by Athol at cost at $500 000.The Judith group depreciation rate for buildings is 10% p.a.The tax rate is 30%.
What would be the consolidation data adjustment entry for 31 December 20X5?

A) $\begin{array}{llcc} \text { Dr. Depreciation expense-buildings } &\$5000 \\ \text { Cr. Accumulated depreciation-buildings} &&\$5000\\ \text { Dr. Deferred tax asset } &\$1500\\ \text {Cr. Deferred tax revenue } &&\$1500\\\end{array}$

B)Dr. Deferred tax liability $\quad$ $\quad$$\$ 15000$
Cr. Deferred tax expense $\quad$ $\quad$$\quad$ $\quad$ $\quad$ $\quad$ $\$ 15000$


C) $\begin{array}{llcc} \text { Dr. Depreciation expense-buildings } &\$5000 \\ \text { Cr. Accumulated depreciation-buildings} &&\$5000\\ \text { Dr. Deferred tax revenue } &\$1500\\ \text {Cr. Deferred tax liability } &&\$1500\\\end{array}$



D)No entry required

Answer 2

$\begin{array}{llcc} \text { Dr. Depreciation expense-buildings } &\$5000 \\ \text { Cr. Accumulated depreciation-buildings} &&\$5000\\ \text { Dr. Deferred tax asset } &\$1500\\ \text {Cr. Deferred tax revenue } &&\$1500\\\end{array}$

Question 3

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was:
1 January 20X0 $\quad$$\quad$$\quad$ $100 000
31 December 20X3 $\quad$$\quad$ $270 000
31 December 20X6 $\quad$$\quad$ $240 000
31 December 20X8 $\quad$$\quad$ $360 000
The subsidiary applies the cost model and the group applies the revaluation model.The carrying amount of the land immediately before control date is $40 000.
What is the correct consolidation data adjustment entry for 31 December 20X3?

A)
$\begin{array}{lcc}\text { Dr Land } &\$60000 & \\\text {Cr. Fair value reserve } & & \$60000 \end{array}$



B)
$\begin{array}{lcc}\text { Dr Land } &\$170000 & \\\text {Cr. Fair value reserve} & & \$170000 \end{array}$


C)
$\begin{array}{lcc}\text { Dr Land } &\$170000 & \\\text {Cr. Fair value reserve} & & \$170000 \end{array}$ .



D)None of the above

Answer 3

$\begin{array}{lcc}\text { Dr Land } &\$170000 & \\\text {Cr. Fair value reserve} & & \$170000 \end{array}$

Question 4

April Ltd owns 100% of the issued share capital of Sun Ltd.During the year ended 31 December 20X1 Sun Ltd declared and paid a dividend of $850 000 out of post acquisition profits.Which combination of amounts correctly shows the total amount of dividend revenue, if any, in April Ltd's financial statements and in its consolidated financial statements?

A) $\begin{array}{llcc} \text { April Lad's statements(\$)} & \text {April Ltd's consolidated statements(\$) } \\850000&850000\\\end{array}$

B) $\begin{array}{llcc} \text { April Lad's statements(\$)} & \text {April Ltd's consolidated statements(\$) } \\0&0\\\end{array}$

C) $\begin{array}{llcc} \text { April Lad's statements(\$)} & \text {April Ltd's consolidated statements(\$) } \\0&850000\\\end{array}$

D) $\begin{array} { l l } \text { April Ltd's statements (\$) } & \text { April Ltd's consolidated statements (\$) } \\850000 & 0\end{array}$

Question 5

Subsidiary has internally generated an intangible asset that it does not recognise in its own account balances and financial statements.Parent assesses the value of the intangible at $500 000.The correct consolidation data adjustment for the intangible is:
Dr.Intangible $500 000
Cr.Asset revaluation reserve $500 000

Question 6

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was:
1 January 20X0 $\quad$$\quad$$\quad$ $100 000
31 December 20X3 $\quad$$\quad$ $270 000
31 December 20X6 $\quad$$\quad$ $240 000
31 December 20X8 $\quad$$\quad$ $360 000
The group applies the cost model.The carrying amount of the land immediately before control date is $40 000.
What is the correct consolidation data adjustment entry for 31 December 20X6?

A)
$\begin{array}{lcc}\text { Dr Land } &\$60000 & \\\text {Cr. Fair value reserve} & & \$60000 \end{array}$

B)
$\begin{array}{lcc}\text { Dr Land } &\$60000 & \\\text {Cr. Asset revaluation reserve } & & \$60000 \end{array}$


C)
$\begin{array}{lcc}\text { Dr Land } &\$200000 & \\\text {Cr. Fair value reserve } & & \$200000 \end{array}$


D)
$\begin{array}{lcc}\text { Dr Land } &\$200000 & \\\text {Cr. Asset revaluation reserve } & & \$200000 \end{array}$

Question 7

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was:
1 January 20X0 $\quad$$\quad$$\quad$ $100 000
31 December 20X3 $\quad$$\quad$ $270 000
31 December 20X6 $\quad$$\quad$ $240 000
31 December 20X8 $\quad$$\quad$ $360 000
The group applies the cost model.The carrying amount of the land immediately before control date is $40 000.
What is the correct consolidation data adjustment entry for 31 December 20X9?

A)
$\begin{array}{llcc} \text { Dr Land } &\$60000 \\ \text { Cr. Fair value reserve } &&\$60000\\ \text {Dr Revenue-gain on sale \ } &\$60000\\ \text { Cr. Land } &&\$60000\\\end{array}$

B)
$\begin{array}{llcc} \text { Dr Land } &\$60000 \\ \text { Cr. Fair value reserve } &&\$60000\\ \text {Dr Revenue-gain on sale \ } &\$60000\\ \text { Cr. Land } &&\$60000\\\end{array}$

C)
$\begin{array}{lcc}\text { Dr Land } &\$200000 & \\\text {Cr. Fair value reserve } & & \$200000 \end{array}$


D)
$\begin{array}{llcc} \text { Dr Land } &\$320000 \\ \text { Cr. Fair value reserve } &&\$320000\\ \text {Dr Revenue-gain on sale \ } &\$310000\\ \text { Cr. Land } &&\$310000\\\end{array}$

Question 8

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $850 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits.
Which of the following correctly describes the accounting procedures that will arise as a result of the business combination?

A)The Rose Group will record a goodwill asset of $100 000 on its consolidation worksheet if prepared as at 30 June 20X4
B)Rose Ltd will record a goodwill asset of $100 000 in its ledger as of 1 July 20X3.
C)The Rose Group will record a goodwill asset of $25 000 on its consolidation worksheet if prepared as at 30 June 20X4
D)None of the above are appropriate

Question 9

Angels Ltd acquired 100% of ACDC Ltd on 1 July 20X0 for $2 000 000, when the equity of ACDC Ltd comprised paid up capital of $1 400 000 and retained profits of $300 000.All ACDC Ltd's balance sheet was reported at fair value at acquisition date.During the year ended 30 June 20X1 ACDC Ltd declared and paid a total dividend of $100 000 out of pre-acquisition profits.What is the elimination entry for these transactions for the year ended 30 June 20X1? Assume AASB 127.38A was operational during this period.

A) $\begin{array} { l c c } \text { Accounts } & \text { Debit } \$ & \text { Credit } \$ \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$
B) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 200000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$


C) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 200000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } &300000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$


D) $\begin{array} { l r c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$

Question 10

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was:
1 January 20X0 $100 000
31 December 20X3 $270 000
31 December 20X6 $240 000
31 December 20X8 $360 000
The group applies the cost model.The carrying amount of the land immediately before control date is $40 000.
What is the profit on sale of land attributable to the group in 20X9?

A)$60 000
B)$310 000
C)$250 000
D)None of the above

Question 11

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $850 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits.
Which of the following is the correct substitution elimination entry as at 30 June 20X4?

A)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 150000 \\ \text { Dr. Goodwill } & 100000 \\\text { Cr. Investment}&&\$ 850000\end{array}$


B)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 225000 \\ \text { Dr. Goodwill } & 25000 \\\text {Cr. Investment}&&\$ 850000\end{array}$


C)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 225000 & \\\text { Dr. Goodwill } & 100000 & \\\text { Cr. Investment } & & \$ 925000\end{array}$
D)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 25000 \\ \text { Dr. Goodwill } & 100000 \\ \text { Cr. Investment}&&\$ 725000 \end{array}$

Question 12

Led Ltd acquired 100% of Zeppelin Ltd on 30 June 20X0 by paying $7 million cash.At that date the net assets of Zeppelin Ltd was as follows:
$$\begin{array} { l r r } & \text { Recorded amount } & \text { Fair value } \\\text { Total assets } & \$ 9 \text { million } & \$ 10 \text { million } \\\text { Total liabilities } & \$ 1 \text { million } & \$ 1 \text { million } \\\text { Net assets } & \$ 8 \text { million } & \$ 9 \text { million }\end{array}$$
Total assets comprise buildings of $6 million, equipment of $3 million and accounts receivable of $1 million.All these figures are fair values.What is the recorded amount of buildings in Led Ltd's consolidated financial statements for the year ended 30 June 20X0? Assume no asset revaluations.

A)$6 million
B)$3 million
C)$2 million
D)$4.66 million

Question 13

Honky Ltd acquired all the issued share capital of Cat Ltd on 1 July 20X0.Goodwill acquired was $1 000 000 and Honky Ltd tests this goodwill for impairment every year.As at July 1 20X5 $500 000 or the original goodwill had been recorded as impaired.For the year ended June 30 20X6 a further $100 000 was regarded as being impaired.What is the elimination journal entry accounting for the impairment of this goodwill in Honky Ltd's consolidated financial statements for the year ended 30 June 20X6?

A) $\begin{array} { l l c } \text { Accounts } & \text { Debit } \$ & \text { Credit \$ } \\\text { Goodwill impairment expense } & 100000 & \\\text { Retained profits } & 600000 & \\\text { Accumulated goodwill impairment } & & 700000\end{array}$
B) $\begin{array}{lcc}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill amortisation expense } & 100000 & \\\text { Goodwill } & & 100000\end{array}$

C) $\begin{array} { l c c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill impairment expense } & 100000 & \\\text { Retained profits } & 500000 & \\\text { Accumulated goodwill impairment } & & 600000\end{array}$
D) $\begin{array}{lcc}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill amortisation expense } & 100000 & \\\text { Goodwill } & & 100000\end{array}$ .

Question 14

The substitution elimination entry may stay unchanged for several or more years after control date.

Question 15

Angels Ltd acquired 100% of ACDC Ltd on 1 July 20X0 for $2 000 000, when the equity of ACDC Ltd comprised paid up capital of $1 400 000 and retained profits of $300 000.All ACDC Ltd's balance sheet was reported at fair value at acquisition date.During the year ended 30 June 20X1 ACDC Ltd declared and paid a total dividend of $100 000 out of pre-acquisition profits.What is the elimination entry for these transactions for the year ended 30 June 20X1? Assume AASB 127.38A was not operational during this period.

A) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$

B) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 200000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$

C) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 200000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$


D) $\begin{array} { l r c } \text { Accounts } & \text { Debit } \$ & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 400000 \\\text { Retained profits } & 100000 & \\\text { Dividend revenue } & 200000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$

Question 16

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $500 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits.
Which of the following correctly describes the accounting procedures that will arise as a result of the business combination?

A)The Rose Group will record a bargain purchase of $250 000 on its consolidation worksheet if prepared as at 30 June 20X4
B)Rose Ltd will record a bargain purchase gain of $250 000 in its ledger as of 1 July 20X3.
C)The Rose Group will record a goodwill asset of $325 000 on its consolidation worksheet if prepared as at 30 June 20X4
D)None of the above are appropriate

Question 17

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $500 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits.
Which of the following is the correct substitution elimination entry as at 30 June 20X4?

A)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 150000 & \\\text { Cr. Bargain purchase gain } & & \$ 250000 \\\text { Cr. Investment } & & 500000\end{array}$
B)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 75000 & \\\text { Cr. Bargain purchase gain } & & \$ 175000 \\\text { Cr. Investment } & & 500000\end{array}$
C)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 150000 & \\\text { Cr. Bargain purchase gain } & & \$ 175000 \\\text { Cr. Investment } & & 575000\end{array}$
D)None of the above are appropriate because the bargain purchase is recognised in Rose's separate financial statements.

Question 18

Reith Ltd owns all of the 10 million issued ordinary shares of Beasley Ltd.Beasley Ltd declared and paid a dividend of $0.80 per share during the 20X1 financial year out of profits it earned during 1999.Reith Ltd acquired Beasley Ltd in 20X0.What is the journal entry recorded by Reith Ltd in its own accounts for the 20X1 financial year?

A) $\begin{array}{llcc} \text { Accounts } & \text { Debit \$000 } & \text {Credit\$000 } \\ \text { Bank } &8000\\ \text { Dividend Revenue } &&8000\\\end{array}$

B) $\begin{array}{llcc} \text { Accounts } & \text { Debit \$000 } & \text {Credit\$000 } \\ \text { Bank } &8000\\ \text { Investment in Beasley Ltd} &&8000\\\end{array}$

C) $\begin{array}{llcc} \text { Accounts } & \text { Debit \$000 } & \text {Credit\$000 } \\ \text { Investment in Beasley Ltd } &8000\\ \text {Bank } &&8000\\\end{array}$


D) $\begin{array}{llcc} \text { Accounts } & \text { Debit \$000 } & \text {Credit\$000 } \\ \text { Investment in Beasley Ltd } &8000\\ \text { Retained Profits } &&8000\\\end{array}$

Question 19

Angels Ltd acquired 100% of ACDC Ltd on 1 July 20X0 for $2 000 000, when the equity of ACDC Ltd comprised paid up capital of $1 400 000 and retained profits of $300 000.All ACDC Ltd's balance sheet was reported at fair value at acquisition date.During the year ended 30 June 20X1 ACDC Ltd declared and paid a total dividend of $100 000 out of pre-acquisition profits.What is the elimination entry for these transactions for the year ended 30 June 20X5? (assume no other transactions).Assume AASB 127.38A was operational during this period.

A) $\begin{array} { l r r } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$
B) $\begin{array} { l r r } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 200000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$
C) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } &200000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 1900000\end{array}$

D) $\begin{array} { l r c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Goodwill } & 300000 & \\\text { Paid up capital } & 1400000 & \\\text { Retained profits } & 300000 & \\\text { Investment in ACDC Ltd } & & 2000000\end{array}$

Question 20

Judith Ltd took control of Athol Ltd on 1 January 20X5.Athol inventory is overstated by $5000 but is shown at the correct amount in the Judith group consolidation.The tax rate is 30%.
What would be the consolidation data adjustment entry for 1 January 20X5?

A)
Dr. Cost of sales $\quad \$ 5000$
Cr. Inventory $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 5000$
Dr. Deferred tax asset $\quad \$ 1500$
Cr. Deferred tax revenue $\quad$$\quad$$\quad$$\quad$$\$ 1500$
B)Dr. Deferred tax liability $\quad$$\quad$$\quad$ $\$ 1500$
Cr. Deferred tax expense $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 1500$
C)
$\begin{array}{llcc} \text { Dr. Cost of sales } &\$5000 \\ \text { Cr. Inventory} &&\$5000\\ \text { Dr. Deferred tax revenue } &\$1500\\ \text {Cr. Deferred tax liability } &&\$1500\\\end{array}$

D)No entry required

Question 21

Wholly owned Subsidiary has the following balances at control date 20X1:

During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The 20X2 profit is before any impact of the downward asset revaluation.The asset revaluation reserve all relates to previous revaluation of plant.
During 20X3 Subsidiary incurs $50 000 of losses.
The amount of accumulated losses included in the consolidation for 20X3 (that is, not eliminated) is $125 000.

Question 22

The elimination of intra-group debts does not have any tax effects.

Question 23

Wholly owned Subsidiary has the following balances at control date 20X1:

Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%.
Subsidiary assets are at fair value except for land, which the Subsidiary measures at cost and group policy is for revaluation.The land at cost is $60 000 and the fair value is $150 000.
In the consolidation there will be a deferred tax liability of $27 000.

Question 24

Wholly owned Subsidiary has the following balances at control date 20X1:

During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The asset revaluation reserve all relates to previous revaluation of plant.
During 20X3 Subsidiary incurs $50 000 of losses.
The substitution elimination in 20X3 for asset revaluation reserve would be Cr.$200 000.

Question 25

Subsidiary has property recorded at $60 000 using the cost method.Parent assesses the fair value of the property at $130 000.Group policy is to use the cost method.The correct consolidation data adjustment for the property is:
Dr.Property $70 000
Cr.Asset revaluation reserve $70 000

Question 26

Wholly-owned Subsidiary has the following balances at control date 20X1:

During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The asset revaluation reserve all relates to previous revaluation of plant.
During 20X3 Subsidiary incurs $50 000 of losses.
The substitution elimination in 20X3 for retained profits would be Cr.$25 000.

Question 27

Wholly owned Subsidiary has the following balances at control date 20X1:

Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%.
In the consolidation for 20X1, recognition of goodwill generates a deferred tax asset of
$30 000.

Question 28

Wholly owned Subsidiary has the following balances at control date 20X1:

Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%.
Subsidiary assets are at fair value except for inventory, which the Subsidiary measures at $20 000.Under group policy the amount would be $10 000.
In the consolidation there will be a deferred tax liability of $3000.