HI5020 Deferred Tax Liability Assignment Sample

Corporate Accounting - Answer 1

1. Calculation of Company’s taxable profit and its tax payable for 2017

1. Determination of Deferred Tax Liability/Deferred Tax Asset

Depreciation allowed by ATO for taxation purposes $ 160,000

Depreciation charged in Books $ 128,000

_ ________

$ 32,000

Deferred Tax Liability = 30% of 32,000= $ 9,600

1. Journal entries on 30^th June’2017

Corporate Accounting - Answer 2

(b) Amount of goodwill (or bargain purchase) arising out of the acquisition

(d) Amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50

Corporate Accounting - Answer 3

Corporate Accounting - Answer 4

1. The intra group transactions between the parent entity and the subsidiary entity must eliminated in full on consolidation even if the parent company does not hold 100 percent of equity of the subsidiary company
2. Non-controlling interest is also known as minority interest. It is an ownership position, wherein a shareholder owns less than 50% of shareholding and has no control over the decisions. For e.g. ABC Ltd. buys 80% of shareholding of DEF Ltd.. The balance 20% would be called as non-controlling interest.

Disclosure requirements for Non-Controlling Interest

Non-Controlling Interest must be presented by the parent company its consolidated statement of financial position within the equity but separately from the equity of the owners of the parent.

1. NCI is not affected by the adjustments for intra group transactions (as full effects of these transactions are eliminated on consolidation)
2. The following are the steps involved in calculation of NCI

• Calculate fair value of the non-controlling interest (fair value of the equity). This is the value at which you can reasonably expect to sell your holding in the market
• Make any fair-value adjustments, if applicable
• Add prorate income attributed to the non-controlling equity interest.
• Subtract prorate share of dividends.
• This final fair value will be recorded in the equity section of the consolidated balance sheet of the parent company.

Corporate Accounting - Answer 5

1. In case of sale of current assets by the parent entity to the subsidiary entity, profit on its sale shall be eliminated to the extent of proportion of current assets still owned by possessed by subsidiary entity at the end of accounting year. The related. Hence, Accounting entry to be made shall be as follows:

Dr. Cr.

$ $

Retained Earnings 15,000

Cost of Sales 13,500

Inventory 1,500

The corresponding effect of deferred tax shall be recognised as follows

Deferred Tax Asset 450

Income Tax Expense 450

1. No elimination entry shall be made as whole Inventory is sold by the end of accounting year.

 (b) Journal Entries

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