Dion Ltd acquired a 60% ownership interest in Sean Ltd on 30 June 2021. On the same day, Sean Ltd acquired a 70% ownership interest in Jayden Ltd. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 2022 and 30 June 2023.
i. On 1 July 2021 Sean sold an item of plant to Jayden for a profit of $40 000. The remaining useful life of the plant at the date of transfer was 4 years.
ii. On 1 September 2021, Jayden paid a dividend of $50 000 from profits earned since 30 June 2021.
iii. Dion lent $60 000 to Sean on 1 January 2022. Interest charged on the loan for the year ended 30 June 2022 was $4000 and for the year ended 30 June 2023 was $8000.
iv. On 31 May 2022 Dion sold inventories to Jayden for $30 000. Profit earned on the sale was $4000. Jayden sold the inventories to external parties on 1 August 2022.
Details of profits earned by entities within the group for the years ended 30 June 2022 and 30 June 2023 are:
The tax rate is 30%.
The effect of the interest paid by Sean to Jayden on the NCI of Sean for the year ended 30 June 2023 is:
A) an increase in NCI of $2 400
B) an increase in NCI of $3 200
C) an increase in NCI of $4 640
D) nil.
Correct Answer:
Verified
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