Reference no: EM133530852
Case Study: On 1 July 2021, Kumar Ltd acquired 30% of the shares in Beau Ltd for $510,000 cash, which gave Kumar Ltd significant influence over Beau Ltd. Kumar Ltd is a parent entity and does not prepare consolidated financial statements.
In the financial year ended 30 June 2023, Beau Ltd:
• recorded a profit of $33,000 after tax.
• Paid an interim dividend of $3,000.
• Declared a final dividend of $10,000.
In the previous year, 30 June 2022, dividends of $5,000 were paid due to the pandemic and Beau Ltd recorded a profit of $9,000 after tax.
The following inter-entity transactions have occurred between Kumar Ltd and Beau Ltd:
a On 1 September 2021 (prior year), Beau Ltd sold plant and equipment with a carrying amount of $390,000 to Kumar Ltd for $420,000. The depreciation rate applied was 20% p.a.
b On 1 March 2023, Kumar Ltd sold inventories to Beau Ltd for $55 000. The original cost was $39,000. Beau Ltd sold 25% of this inventory externally by 30 June 2023.
c On 1 December 2022 Beau Ltd sold a motor vehicle with a value of $24,000 to Kumar Ltd for $30.000. A depreciation rate of 10% p.a. was applied Kumar Ltd applies AASB 128/IAS 28 in accounting for its investment in Beau Ltd. Assume 30% tax rate.
Required:
- Calculate the share of profit for Kumar Ltd for the year ended 30 June 2023. Show all workings
- Prepare the worksheet entries for Kumar Ltd, as at 30 June 2023. Include a date for each entry and ignore narrations