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Determining the Amount of General Reserve

   

Added on  2019-09-24

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1CONSOLIDATION OF FINANCIAL STATEMENTS
Determining the Amount of General Reserve_1

2Table of Contents1.Solution to Question..................................................................................... ..3-74.References.....................................................................................................8
Determining the Amount of General Reserve_2

3Solution:Computation of Fair Value of identifiable net assets acquired: (In accordance with AASB 3)Share Capital $ 5,00,000 Retained Earnings $ 50,000 General Reserve $ 1,00,000 Fair Value of identifiable net assets acquired $ 6,50,000 Less : Cost of Acquisition$ 7,00,000 Goodwill at acquisition {700000 - 650000} $ 65,000 IIConsolidation Journal Entries for the year ending 30 June 2016Particulars Debit ($) Credit ($) 1.Elimination of Intragroup Sales and Purchases of InventorySales$ 50,000 Cost of Sales $ 50,000 2.Elimination of unrealised profit in Closing InventorySold by Lands Ltd to Peter LtdCost of Sales$ 5,000 Inventory $ 5,000 (Unrealized Profit = $ 25,000 - $ 20,000 = $ 5,000)3.Elimination of income tax expense on unrealized profit and recognition of deferred tax assetSold by Lands Ltd to Peter LtdDeferred tax asset$ 1,500Income tax expense $ 1,500($5,000 * 30% = $1,500)4.Elimination of Gain on sale of PlantGain on Sale of Plant$ 800 Plant$ 800 5.Elimination of income tax expense on gain on sale of plant and recognition of deferred tax assetDeferred tax asset$ 240 Income tax expense $ 240 ($800 * 30% = $240)6.Elimination of Excess Depreciation on PlantAccumulated Depreciation $ 214Depreciation $ 214 ($1,500/7 years = $214)7.Elimination of income tax expense on excess depreciation expense on plant and recognition of deferred tax asset
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