Prepare the consolidated statement of financial position

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Reference no: EM13889656

Question 1: Accounting for Lease

Owing to low liquidity, Lisa Ltd decides on 1 July 2015 to sell its land and buildings to Anderson Ltd. The carrying values of the land and buildings in the books of Lisa Ltd, at 1 July 2015, are

Land, at cost                  $1800000
Buildings at cost              $1750000
Accumlated depreciation   $350000

The land and buildings are sold for $4334 700 (their fair value), with the amount being allocated equally as follows:

Land                                           $2167350

Buildings                                     $2167350

Immediately following the sale, Lisa Ltd decides to lease back the land and buildings from Anderson Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 12 per cent. It is expected that the buildings will be demolished at the end of the lease term. The lease is non-cancellable, returns the land and buildings to Anderson Ltd at the end of the lease, and requires the following lease payments:

Payment on inception of the lease on 1 July 2015       $600000
Payment on 30 June each year starting 30 June 2016  $500000

There is no residual payment required

REQUIRED

a) Provide the entries for the sale and leaseback in the books of Lisa Ltd as at 1 July 2015.

b) Provide the entries for the purchase and lease in the books of Anderson ltd as at 1 July 2015

c) Provide the entries in the books of Lisa Ltd as at 30 June 2025.

d) Provide the entries in the books of Anderson Ltd as at 30 June 2025.

Question 2: Accounting for Income Tax

MR Limited commences operations on 1 July 2014 and presents its first statement of comprehensive income and first statement of financial position on 30 June 2015. The statements are prepared before considering taxation. The following information is available:

Statement of comprehensive income for the year ended 30 June 2015

Grossprofit

 

730000

Expenses

 

 

Administrationexpenses

80000

 

Salaries

200000

 

Long-serviceleave

20000

 

Warrantyexpenses

30000

 

Depreciation  expense-plant

80000

 

Insurance

20000

430000

Accounting profit before tax

 

300000

Assets and liabilities as disclosed in the statement of financial position as at 30 June 2015

Assets

 

 

Cash

 

20000

Inventory

 

100000

Accountsreceivable

 

100000

Prepaidinsurance

 

10000

Plant-cost

400000

 

lessAccumulateddepreciation

80000

320000

Totalassets

 

550000

Liabilities

 

 

Accounts payable

 

80000

Provision for warranty expenses

 

20000

Loanpayable

 

200000

Provision for long-service leave expenses

 

-20000

Totalliabilities

 

320000

Netassets

 

230000

Other information

• All administration and salaries expenses incurred have been paid as at year end.

• None of the long-service leave expense has actually been paid. It is not deductible until it is actually paid.

• Warranty expenses were accrued and, at year end, actual payments of $10000 had been made (leaving an accrued balance of $20000). Deductions are available only when the amounts are paid and not as they are accrued.

• Insurance was initially prepaid to the amount of $30 000. At year end, the unused component of the prepaid insurance amounted to $10000. Actual amounts paid are allowed as a tax deduction.

• Amounts received from sales, including those on credit terms, are taxed at the time the sale is made.

• The plant is depreciated over five years for accounting purposes, but over four years for taxation purposes.

• The tax rate is 30 per cent.

REQUIRED

Provide the journal entries to account for tax in accordance with AASB 112.

Question 3: Consolidation

Sandy Ltd acquired 100 per cent of the issued capital of Beach Ltd on 30 June 2014 for $900 000, when the statement of financial position of Beach Ltd was as follows:


$0
$0
Assets


Accountsreceivable 70 Loan 300
Inventory 100

Land 400 Shareholders'equity
Property, plant and equip. 700 Sharecapital 500
Accumulated   depreciation -270 Retainedearnings 200

1000
1000

Additional information

• The tax rate is 30 per cent.

• As at the date of acquisition, all assets of Beach Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530000. Beach Ltd adopts the cost model for measuring its property, plant and equipment. The property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value.

• One year following acquisition it was considered that Beach Ltd's goodwill had a recoverable amount of $60000.

• Beach Ltd declared a dividend of $40000 on 10 July 2014, with the dividends being paid from pre- acquisition retained earnings.

• The statements of financial position and statements of comprehensive income of Sandy Ltd and Beach Ltd one year after acquisition are as follows:

Statements of financial position of Sandy Ltd and Beach Ltd as at 30 June 2015

 

Sandy

Ltd

Beach

Ltd

 

$000

$000

Assets

 

 

Cash

80

40

Accountsreceivable

50

50

Inventory

140

123

Land

600

400

Property, plant and equipment

900

700

Accumulated   depreciation

-300

-313

Investment in Beach Ltd

900

 

Total assets

2370

1000

Liabilities

 

 

Accounts payable

100

10

Dividends payable

100

50

Loan

670

140

Shareholders'equity

 

 

Sharecapital

1000

500

Retainedearnings

500

300

 

2370

1000

Reconciliation of opening and closing retained earnings

Profit after tax

400

190

Retained earnings -30 June 2014

300

200

Interimdividend

-90

-40

Finaldividend

-110

-50

Retained earnings -30 June 2015

500

300

REQUIRED

Prepare the consolidated statement of financial position for the above entities as at 30 June 2015.

Reference no: EM13889656

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