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Instructions:
This exam consists of five (5) questions.
Question 1 (10 marks)
Prepare general journal entries to record the following unrelated transactions of a limited company:
Question 2 (10 marks)
On 1 January 2019 Liam Ltd acquired 90% of the issued shares of Ian Ltd. During the year ended 31 December 2019 the following intra group transactions occurred:
Ian Ltd sold inventory to Liam Ltd $360,000. This inventory costed Ian Ltd $300,000. At 31 December 2019 Liam Ltd held 50% of the inventory acquired from Ian Ltd.
An item of equipment originally acquired by Liam Ltd on 1 January 2017 at a cost of $400,000 was sold to Ian Ltd on 1 January 2019 for $340,000. Liam Ltd had depreciated this asset at 10% per annum on a straight-line basis with no scrap value. There is no change in the asset expected life subsequent to the sale.
Required:
Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 31 December 2019. Assume a tax rate of 30%.
Question 3 (10 marks)
KGB Security Ltd provides the following information at 30 June 2019 (the first year of operation of the company)
Statement of Financial Position (Balance Sheet)
As at 30 June 2019
Assets | $000 | Liabilities and owner’s equity | $000 |
Prepayments | 20 | Provision for Annual Leave | 90 |
Accounts Receivable | 360 | Loan | 320 |
Allowance for Bad Debts | (40) | Share Capital | 1,600 |
Inventory | 600 | Retained Earnings | 330 |
Plant and Equipment | 1,800 | ||
Accum Depreciation | (400) | ||
2,340 | 2,340 |
Other Information:
Required:
Question 4 (10 marks)
Humorous Ltd had cash and cash equivalents at 1 July 2018 of $ 1,400,000. The transactions of Humorous Ltd for the year to 30 June 2019 are as follows:
Required:
Prepare the statement of cash flows of Humorous Ltd for the year to 30 June 2019.
On January 1, 2019, Horizon Corporation, an UK based company acquired Spectacular Company as a subsidiary in Australia with an initial investment cost of 360,000 Australian dollars (AUD). Spectacular's December 31, 2019, trial balance in AUD is as follows:
Question 5 (10 marks)
Debit (AUD) | Credit(AUD) | |
Cash at bank | 42,000 | |
Accounts Receivable | 120,000 | |
Receivable from Horizon | 30,000 | |
Inventory | 150,000 | |
Machinery | 600,000 | |
Accumulated Depreciation | 60,000 | |
Accounts Payable | 72,000 | |
Debenture liability | 300,000 | |
Share Capital | 360,000 | |
Sales | 900,000 | |
Cost of goods sold | 420,000 | |
Depreciation Expense | 60,000 | |
Operating Expense | 180,000 | |
Dividend paid | 90,000 | |
Total | 1,692,000 | 1,692,000 |
Other Information:
January 1 | AUD 1 = € 0.73 |
March 1 | AUD 1 = € 0.74 |
November 1 | AUD 1 = € 0.77 |
December 31 | AUD 1 = € 0.80 |
2019 Average | AUD 1 = € 0.75 |
Required:
END OF EXAMINATION PAPER
ANSWER:
Cash 360,000
Sales Revenue 360,000
(To record the sales revenue)
Cost of sales 300,000
Inventory 300000
(To record a cost of sale of inventory)
Cash 340000
Accumulated Depreciation 40000
Equipment 400000
Gain on sale of Equipment 20000
(To record gain on sale of equipment)
Dividends Payable 100000
Dividend receivable 100000
(To record dividend paid)
Loan Account 100,000
Cash 100,000
(To record a loan amount)
Interest expense 8000
Interest payable 8000
(To record an interest due on Ian Ltd)
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