What is a ‘business combination’ and which Australian accounting standard deals with this topic

Question 1 XYZ Ltd was registered on 30 June 2020. The next day, the directors issued a prospectus inviting applicants for 200,000 ordinary shares with an issue price of $1. The shares were payable in full on application. By 31 July, the company had received 400,000 applications, together with the application monies. The directors allotted 200,000 shares on 1 August and returned the money for additional applications. Required: Prepare general journal entries to record the above data . Enter the above data into the ledger tables below. Debit $ Credit $ Balance $ Trust account 2020 Application 2020 Paid-up capital 2020 Bank 2020

Question 2 (a) Why is the EPS (earnings per share) figure useful to the users of general purpose financial reports (GPFR)? Give reasons to support your answer. (b) Why might the usefulness of EPS (earning per share) be limited? Give reasons to support your answer.

Question 3 What is a ‘business combination’ and which Australian accounting standard deals with this topic? Does any goodwill or bargain purchase need to be reported on acquisition? If so, where is the goodwill / bargain purchase amount reported? Parma Ltd purchased a parcel of assets and liabilities comprising a business directly from Pauls Pty Ltd. The parcel, measured at net fair values, consisted of: Balance of Accounts: Plant 250,000 Land 340,000 Vehicles 320,000 Accounts receivable 130,000 Accounts payable (148,000) Total 892,00 Required Prepare journal entries to record the acquisition by Parma Ltd, if the cost of acquisition was $1,100,000 cash.

Question 4 On 1 July 2019, Canola Ltd acquired 100% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the financial year ending 30 June 2020. (i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party. (ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully depreciated by Palm Ltd at 30 June 2020 and valued at $0 on Palm’s books. Required: Prepare the journal entries required to eliminate the intra-group transactions above. Ignore any tax effects. When are consolidated profits recorded for inventory transfers within the group?

Question 5 On 1st July, 2018 Murray Ltd acquired 70% of the share capital of Darling Ltd for $100,000,000. Equity of Darling Ltd at acquisition date was: Share Capital $ 60,000,000 General Reserve $ 20,000,000 Retained Earnings $ 10,000,000 All assets and liabilities of Darling Ltd were recorded at fair value on acquisition. Ignore Tax effects. Required: Complete the worksheet below using the partial goodwill method with the NCI measured at the proportionate share of the acquiree’s identifiable net assets. (5 marks) Elimination of Investment in Darling Ltd Darling Ltd (S) $,000 Murray Ltd (70% of Darling) (P) $,000 30% NCI $,000 Fair Value of consideration transferred Less: FV of identifiable assets acquired & liabilities assumed Share capital on acquisition date 60,000 General reserve-acquisition date 20,000 Retained earnings-acquisition date 10,000 Fair value adjustment Goodwill on acquisition Non-controlling interest Prepare the consolidation adjustments and eliminations entries and recognise the NCI in the pre-acquisition equity of Darling Ltd, using the partial goodwill method with the NCI measured at the proportionate share of the acquiree’s identifiable net assets.

Question 6 The following information relates to Sonata Ltd. (a) At the beginning of the accounting period the company has a salary payable liability of $300 and at the reporting date a salary payable of $400. During the year the salary expense shown in the income statement was $700. (b) At the beginning of the accounting period the company has property plant and equipment (PPE) with a carrying amount of $300. At the end of the accounting period, the carrying amount of the PPE is $1,000. During the year depreciation charged was $90, a PPE with a carrying amount of $70 was sold for $50. (c) At the beginning of the accounting period the company has retained earnings of $1000 and at the end of the accounting period the balance of the retained earnings is $1500. The reported profit for the year was $3800. (d) Sonata Ltd also provides you with the following information on its sale and collection of accounts receivable: Sales for the year $20,000 Discounts provided to customers for early payment $500 Doubtful debts expense for the year $200 Opening balance of accounts receivable $4,000 Closing balance of accounts receivable $3,500 Opening balance of the allowance for doubtful debts $400 Closing balance of the allowance for doubtful debts $320 Required: (a) Calculate the cash paid for salary (b) Calculate the cash paid to buy new PPE (c) Calculate the dividend paid (d) Calculate cash collected from customer